New Delhi, Sept. 16 -- Merchants will have to pay 18 per cent GST on the Merchant Discount Rate (MDR) charged for UPI payments above Rs 2,000 from October 15, although GST-registered businesses can claim Input Tax Credit (ITC) on the tax paid, tax experts said on Wednesday. Under the proposed framework, merchant payments (P2M) above Rs 2,000 will attract an MDR of 0.4 per cent, capped at Rs 300. A concessional flat MDR of Rs 5 will apply to categories including railways, telecom, insurance and fuel.
The share of P2M transactions above Rs 2,000 has risen from 15.1 per cent in FY23 to 20.1 per cent in the June quarter of FY27, indicating growing use of UPI for higher-value purchases.
AMRG Global Managing Partner Rajat Mohan said the 18 per cent GST would apply only to the MDR, not the transaction value. He estimated annual GST collections at Rs 3,500-Rs 4,000 crore.
Nangia Global Executive Director Sivakumar Ramjee said businesses with taxable GST output could claim ITC, while those dealing in exempt supplies would have to bear the tax. He estimated potential annual collections at over Rs 5,000 crore.
AKM Global's Ikesh Nagpal calculated that Rs 6 lakh crore in monthly high-value merchant payments could generate about Rs 432 crore in monthly GST, or Rs 5,184 crore annually, before exemptions and caps.
Published by HT Digital Content Services with permission from Millennium Post.