The National Payments Corporation of India (NPCI) has clarified concerns over the proposed GST on UPI Merchant Discount Rate (MDR), saying the new framework will have no impact on small merchants and the vast majority of UPI transactions.

From October 15, merchant payments (P2M) above ₹2,000 will attract an MDR of 0.4%, subject to a maximum charge of ₹300 per transaction. A concessional flat MDR of ₹5 will apply to transactions above ₹2,000 in specified sectors, including railways, telecom services, insurance and fuel.

According to NPCI, around 96% of UPI transactions will remain unaffected by the changes. The framework is primarily aimed at specified higher-value merchant transactions rather than everyday low-value digital payments.

NPCI also clarified that eligible GST-registered merchants can claim input tax credit on the GST paid on MDR, subject to applicable rules.

The clarification comes amid concerns that the introduction of MDR and GST could increase the cost of digital payments for small businesses. NPCI said such concerns were misplaced, as small merchants and most UPI transactions will continue without the new MDR burden.

The changes are therefore expected to primarily affect specified high-value merchant payments from October 15, while person-to-person transactions and most routine UPI payments remain outside the new MDR framework.