UPI MDR Charges: Government will not extend the October 15 deadline; 18% GST may be reviewed..

UPI MDR Charges: The government is not inclined to postpone the October 15 deadline for implementing MDR on select UPI transactions. According to government sources, the new system will come into effect on the scheduled date. However, the GST Council may review the 18% GST applicable to the MDR.

What will happen at the October 7 meeting?

The issue of GST on MDR is currently not on the agenda for the GST Council meeting scheduled for October 7. However, sources indicate that the Council might raise this issue during the meeting. In other words, it is not yet certain whether a decision regarding the GST will be taken.

This matter has surfaced at a time when there is concern among businesses regarding MDR. They believe it could increase costs for merchants and potentially impact the overall cost structure of the UPI transaction system.

Why is the government introducing MDR?

The government has defended the implementation of MDR, stating that operating the UPI ecosystem entails significant expenses. The current MDR does not fully cover these costs.

Government sources noted that the MDR on UPI does not fully recover the costs of maintaining the ecosystem. According to the government, the rise in UPI transactions has created a growing need for a sustainable revenue model.

0.4% MDR on transactions exceeding ₹2,000

Under the new system, an MDR of 0.4% will be levied on select UPI merchant transactions exceeding ₹2,000. However, the charge will be capped at a maximum of ₹300 per transaction.

The MDR rates were determined by the Indian Banks' Association (IBA) following consultations with relevant parties; essentially, various stakeholders were consulted during the process of setting these rates. No charges for customers

The government has clarified that no charges will be levied on customers making payments via UPI. This means ordinary customers will be able to continue making UPI payments just as before.

Additionally, person-to-person (P2P) transactions will remain free. The new MDR will apply only to select merchant transactions.

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