The government will closely monitor the implementation of the new Merchant Discount Rate (MDR) on certain UPI transactions to ensure that merchants do not pass the additional cost on to consumers, government sources said on Thursday.
The assurance comes amid on select UPI transactions. Sources said the government has already held discussions with payment aggregators and will take steps to plug gaps in enforcement.
“Steps will be taken to address gaps in enforcement. The government has engaged in talks with payment aggregators. It will closely monitor implementation to ensure that merchants do not pass on the costs to consumers,” the sources said.
The sources also , saying the decision was taken after due consideration.
“MDR is not under any pressure. GST on UPI is a false rumour,” the sources said, adding that the government was confident that UPI transactions would not fall after the rollout.
The sources also said the government does not expect the move to lead to a significant increase in cash transactions or a decline in UPI usage after the new charges come into effect on October 15.
The National Payments Corporation of India (NPCI), which operates the UPI platform, had issued a for specific categories of transactions as part of efforts to establish a sustainable revenue model for the digital payments ecosystem.
Under the new structure, a 0.4 per cent MDR will apply to person-to-merchant UPI transactions above Rs 2,000 from October 15. The charge will be borne by merchants and capped at Rs 300 for transactions of Rs 75,000 or more.
Person-to-person transactions and most routine merchant transactions will continue to remain free. Core services such as railways, telecommunications, fuel and insurance will attract a uniform Rs 5 charge for transactions above Rs 2,000.
Transactions involving capital-market services, including mutual funds and stockbroking, will attract a lower MDR of 0.02 per cent, also capped at Rs 300.
Sources said the decision to introduce the charge in the stock market was taken after consultations with SEBI, stock exchanges and other stakeholders.
Small vendors earning up to Rs 1 lakh a month through UPI QR codes will be exempt from the additional charges. According to officials, the exemption covers nearly 96 per cent of merchant transactions.
The government also sought to dispel concerns over GST on MDR. Sources said there would be no separate GST on UPI transactions, while GST applicable on MDR payments would be eligible for input tax credit.
“There is no separate GST on MDR. Businesses can claim input tax credit on MDR payments,” the sources said, adding that any issue arising from the implementation would be examined by the GST Council.