- Double bang on UPI Transactions…
- 18% GST applicable on MDR above 2000
- What exactly is the tax rule?
UPI GST Impact : The news has come as a shocker for consumers and merchants doing digital transactions. Now MDR is applicable on UPI transactions above Rs.2000. After that now the news is coming out that 18% GST will also be levied on these transactions. What exactly is the matter” (GST Impact)
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It is important to note that from October 15, 2026, 0.4% MDR will be applicable on merchant UPI transactions above ₹2,000. But the discussion is about something else. In fact, reports are doing the rounds that payments over ₹2,000 through UPI are now likely to attract not only MDR, but also 18% GST.
Uniform MDR for specific categories
This new system will be implemented from 15 October 2026. Under this, 0.4% MDR will be levied on person-to-merchant UPI payments above ₹2,000, subject to a ceiling of ₹300. A uniform MDR of ₹5 has been fixed for certain categories like petrol, railways, telecom and insurance.
What is MDR?
MDR is a fee charged for payment processing and settlement by merchants accepting digital payments. This new rule applies to certain UPI merchant payments above ₹2,000. 18% GST will also be levied on this service charge. This means, it has two separate components: the MDR and the GST on that MDR.
5,000 will be charged 18% GST?
Suppose you pay Rs 5,000 to a merchant through UPI. 0.4% MDR will be Rs.20. Now, 18% GST will be levied on this MDR of Rs 20, i.e. the total cost to the trader including MDR and GST will be Rs 23.60.
What happens for amounts above 75,000?
As per the new rules, a maximum MDR limit of Rs 300 has been fixed for P2M UPI payments of Rs 75,000 and above. If a transaction incurs an MDR of Rs 300, then with 18% GST, the total cost to the merchant including MDR and GST could be up to Rs 354.
The calculation at the petrol pump is a little different
Fuel categories are exempted from 0.4% MDR. For fuel payments like petrol and diesel, a flat MDR of ₹5 has been fixed on transactions above ₹2,000. But this amount is not recovered separately from the customer; This is a fee charged by the merchant.
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