Amid debate over Merchant Discount Rate (MDR) on UPI, Finance Minister Nirmala Sitharaman has clarified that customers will not bear the charge.
She said MDR is not a tax, cess or surcharge and the money will not go to the government. As per the new NPCI framework effective from October 15, 2026, there will be no MDR on merchant UPI transactions up to Rs 2000. For Person-to-Merchant (P2M) transactions above Rs 2000, a 0.4% MDR will apply with a cap of Rs 300 per transaction. Person-to-Person (P2P) payments will remain completely free.
The charge will be paid by merchants and will be shared between banks and payment service providers. The government says 96% of P2M transactions will remain unaffected. The GST Council in its meeting on Oct 7 will decide on levying 18% GST on MDR, though merchants can claim Input Tax Credit (ITC).
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