FAQs on GST on UPI MDR and NPCI Guidelines 2026

1. Is UPI MDR currently in effect as of October 23, 2026?

The planned October 15 rollout was postponed until after Diwali. NPCI has said the revised date will be announced separately.

2. What is the proposed standard MDR rate?

The announced framework specifies a 0.4% MDR for eligible P2M transactions above Rs 2,000, capped at Rs 300 per transaction for payments of Rs 75,000 and above.

3. Will customers pay the MDR?

The announced framework places the fee on the merchant side. Banks have been advised to ensure that merchants do not pass it on to customers.

4. Which small merchants qualify for zero MDR?

Eligible merchants receiving up to Rs 1 lakh per month through UPI QR codes under the P2PM category are covered by the zero-MDR framework.

5. Does GST apply to the full UPI payment?

No. GST may apply to the MDR fee under the applicable tax rules, not to the full UPI transaction amount.

6. Can GST-registered merchants claim ITC on GST paid on MDR?

Eligible GST-registered merchants may claim ITC subject to the applicable GST conditions and documentation requirements.

7. What is the proposed MDR for fuel, railway, telecom and insurance payments?

The announced framework specifies a flat Rs 5 MDR on eligible transactions above Rs 2,000 in selected sectors, including fuel, railways, telecom, insurance and agricultural inputs.

8. What is the proposed MDR for capital-market payments?

The announced rate is 0.02%, capped at Rs 300 per transaction, for eligible payments relating to mutual funds, securities, stockbrokers and dealers.

Conclusion: What Merchants Should Know About UPI MDR

As of October 23, 2026, the proposed UPI MDR framework has not commenced on its original schedule. NPCI has deferred the rollout until after Diwali and is expected to notify a revised implementation date separately. Until then, merchants should distinguish between the announced framework and charges actually applied by their payment providers.

The proposed structure retains zero MDR for P2P payments, merchant transactions up to Rs 2,000 and eligible small merchants receiving up to Rs 1 lakh per month through UPI QR codes. Selected essential-service sectors and capital-market payments have separate proposed rates. The government estimates that around 96% of merchant transactions will remain unaffected.

Merchants should review their payment data, confirm their classification, understand the GST and ITC implications, and monitor official NPCI and Finance Ministry updates. 

About the Author: Shiwani Pradhan is Assistant Editor at Finance Outlook India, with over five years of experience in financial journalism and content production. She specialises in developing fact-based, research-driven content on India’s fintech, investment and financial markets. Her work covers investment products, market trends, regulatory developments, and evolving investment opportunities, with a focus on making complex financial topics accessible to readers.