UPI Charges or MDR Will Attract 18% GST From October 15: Report
Starting Oct 15, P2M UPI transactions above INR 2,000 carry a 0.4 per cent MDR plus 18 per cent GST on that fee (total cost INR 47.20 on an INR 10,000 transaction). GST-registered eligible merchants can claim ITC. Flat fees (e.g., INR 5 for railways) and capped fees also have 18 per cent GST applied similarly.
Person-to-merchant (P2M) UPI transactions exceeding INR 2,000 will attract a 0.4 per cent merchant discount rate (MDR) paired with an 18 per cent Goods and Services Tax (GST) starting October 15, aligning processing charges with existing debit and credit card rules. "The GST will apply only to the MDR or fee that is actually charged on eligible UPI transactions," one of the officials told Moneycontrol.
Key Application and Mechanics
- Where GST Applies: The 18 per cent GST applies strictly to the MDR or processing fee levied on eligible UPI transactions, not to the principal transaction value.
- Cost Example: An INR 10,000 transaction incurring a 0.4 per cent MDR (INR 40) adds an 18 per cent GST of INR 7.20 on the fee, bringing the total merchant cost to INR 47.20.
- Input Tax Credit (ITC): GST-registered merchants supplying eligible goods and services can claim the 18 per cent GST component as ITC. UPI New Rules From October 15: Govt Clarifies MDR, GST and RuPay Charges.
Flat Fees and Capped Structures
- Flat Fees: Specified transactions carrying a flat processing fee (such as an INR 5 railway payment) will see the 18 per cent GST calculated directly on that INR 5 charge.
- Capped MDR: Transactions subject to an MDR cap (such as an INR 300 limit) apply the 18 per cent GST tier against the capped fee amount pursuant to applicable guidelines.
Regulatory Context and Comparison
- Procedural Continuity: Underlying UPI exemption categories remain unchanged; GST applies solely where a valid MDR or fee is triggered.
- Card Parity: Credit and debit card processing charges already carry 18 per cent GST as taxable services. Extending this to eligible UPI processing fees normalises service-tax treatment across digital rails, government sources noted. Are Netflix and SIP AutoPay Getting Costlier Under New October 15 UPI MDR Rules?
With the rollout affecting high-value digital payments, merchants should review settlement statements, update billing configurations, and consult tax advisors regarding ITC eligibility before the October 15 implementation date.
(The above story first appeared on LatestLY on Sep 17, 2026 07:13 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).