UPI/MDR and GST

While a Goods and Services Tax (GST) of 18% will apply on the Merchant Discount Rate (MDR) on UPI transactions of more than Rs 2,000, businesses registered under the indirect tax regime can claim the same as input tax credit, a senior finance ministry official said on Thursday. The official, though, admitted that unregistered sellers who have an annual turnover of less than Rs 40 lakh but receive more than Rs 1 lakh every month as UPI payments – and therefore don’t qualify as ‘small merchants’ exempt from MDR – may end up paying GST on payments of more than Rs 2,000.