Summary
- The introduction of the Merchant Discount Rate (MDR) on specified UPI transactions from 15th October 2026 raises critical questions about GST implications.
- For a consultancy transaction of Rs. 10,000 plus 18% GST, the MDR of 0.4% results in an additional cost of Rs. 55.70, including GST on MDR.
- GST-registered merchants can claim input tax credit on the Rs. 8.50 GST paid on MDR, subject to eligibility under Section 16 and restrictions under Section 17(5) of the CGST Act.
- This shift marks a significant change in the UPI ecosystem, moving from a zero-MDR model to introducing charges for high-value
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