NPCI Says GST on UPI MDR Will Not Burden Small Merchants
The NPCI said GST on merchant fees applies to only 4% of person-to-merchant UPI payments and can be claimed as input tax credit.
- The NPCI addressed concerns that an 18% GST on UPI Merchant Discount Rate creates an "additional burden" for sellers, labeling these fears as "misplaced" while clarifying that digital payment costs for merchants remain largely unchanged.
- Government data indicates transactions up to Rs 2,000 constitute more than 96 per cent of UPI merchant transaction volume, meaning the vast majority of payments remain unaffected by the Merchant Discount Rate or any associated GST.
- Merchants can adjust GST paid on the Merchant Discount Rate against tax payable on Goods sales, functioning "in the same manner that input taxes are set off against output tax liability," the NPCI said.
- Unregistered businesses with annual turnover under Rs 40 lakh may still pay GST on payments exceeding Rs 2,000 if they receive more than Rs 1 lakh monthly, though most Small and Medium Enterprises remain exempt.
- Dilip Desai, Founder and Chairman of DHC, advised Small and Medium Enterprises to review accounting systems to ensure transaction-level Merchant Discount Rate and corresponding GST are correctly matched with bank and payment gateway statements.
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GST on MDR will not impose additional burden on merchants: NPCI explains how they can adjust it against tax liability
UPI MDR of 0.4% will apply to P2M transactions above ₹2,000 from 15 October. NPCI says GST paid on MDR can be adjusted against GST payable on sales through input tax credit. Small merchants with monthly UPI receipts up to ₹1 lakh will continue to have zero MDR.
NPCI has argued that MDR charges for UPI will be levied at select merchants, but GST will not be levied on the entire transaction, but rather on the MDR paid. If the transaction is for ₹10,000, GST will not be levied on the ₹10,000, but on the ₹40 MDR paid, at 18%.
NPCI says fears over GST on merchant fee for big UPI payments ‘misplaced’
Concerns have been raised about merchants who may have to pay GST on MDR on UPI payments of over Rs 2,000 but will be unable to claim input tax credit because their annual turnover is lower than the threshold to register under GST.
NPCI Clarifies No GST Burden on Small Merchants over UPI Merchant Discount Rate
Get latest articles and stories on Business at LatestLY. The National Payments Corporation of India clarified that allegations regarding Goods and Services Tax (GST) on Unified Payments Interface (UPI) Merchant Discount Rate (MDR) burdening small merchants and making digital payments costly are incorrect. Business News | NPCI Clarifies No GST Burden on Small Merchants over UPI Merchant Discount Rate.
The Economic Times
Times of IndiaNPCI says GST on UPI MDR will not burden small merchants
NPCI states GST on UPI Merchant Discount Rate is not a burden. Transactions under two thousand rupees have zero MDR and no GST. Over ninety-six percent of merchant transactions are below this threshold. Merchants can adjust GST paid on MDR against their tax liability. Small merchants receiving under one lakh rupees monthly are exempt from MDR.
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