UPI charges: Will 18% GST on MDR fee stay?
What's the story
The Indian government has confirmed that it will not extend the October 15 deadline for implementing Merchant Discount Rate (MDR) on certain Unified Payments Interface (UPI) transactions. However, the Goods and Services Tax (GST) Council could consider reviewing the 18% GST imposed on these charges. The decision comes amid concerns over how MDR would affect merchants and the overall cost of UPI transactions.
Official stance
Government defends UPI-MDR charges
The government has defended the introduction of MDR, saying that these charges don't fully cover the cost of sustaining the UPI ecosystem.
"The MDR in UPI does not 100% make up for the costs of sustaining it," government sources told Moneycontrol.
They also clarified that all person-to-person UPI payments remain free, regardless of amount, and all merchant payments up to ₹2,000 have no MDR levied.
Potential discussions
GST on MDR to be discussed
The GST Council's agenda for October 7 doesn't include the issue of GST on MDR.
However, it could be discussed, especially considering its impact on small merchants who are not registered with GST authorities.
These unregistered businesses can't claim input tax credit (ITC) and thus bear the additional tax cost when charged on MDR for UPI transactions.
Consumer protection
Consumers shouldn't be burdened by MDR: Government
The government has also assured that it will ensure a mechanism is in place to prevent consumers from being burdened by MDR.
This comes as part of its discussions with the Indian Bank Association (IBA).
The official said, "IBA needs to hold awareness campaigns and outreach programs, preferably in regional and local languages."