NPCI dismisses speculation over GST burden due to UPI merchant discount rate as 'incorrect'
The National Payments Corporation of India (NPCI) has issued a clarification, stating that claims 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. The NPCI emphasized that transactions below ₹2,000 have zero MDR and, consequently, no GST. It also highlighted that over 96% of merchant transactions fall below this threshold, and merchants can adjust GST paid on MDR against their tax liability. Small merchants receiving under ₹1 lakh monthly are exempt from MDR entirely.
What this means
This clarification by NPCI aims to allay concerns among merchants and ensure continued adoption of UPI, which remains a cornerstone of India's digital payment infrastructure. For banks and payment service providers, it reinforces the existing structure and addresses potential misinformation that could impact merchant confidence in digital transactions.
Most affected: Digital payments, small merchants, payment service providers
Key takeaway: Be prepared to clearly communicate the actual GST and MDR implications to merchant clients to counter misinformation and maintain trust in UPI transactions.
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