It is clear that some reports that GST imposition on UPI Merchant Discount Rate (MDR) will be an additional burden on small traders and that digital payments will be expensive are contrary to reality.
MDR is applicable only for payments worth more than ₹2,000 in person-to-merchant (P2M) UPI transactions. There is no MDR on transactions up to ₹2,000. Therefore, the question of GST related to MDR does not arise on those transactions.
According to government statistics, UPI merchant transactions worth up to ₹2,000 account for more than 96 percent of the total merchant transaction volume. This means that most business payments made through UPI will not be subject to MDR or GST on it.Even in cases where MDR is applicable, the GST paid on it can be adjusted by the trader from the GST payable on his sales. This is part of the Input Tax Credit scheme. Therefore, GST on MDR will not be an additional final cost to eligible traders.
Similarly, MDR is not applicable for merchants who receive up to ₹1 lakh per month through UPI. As a result, it is clear that small traders will not be burdened by GST on MDR.
