UPI: Big news is here regarding UPI MDR. MDR on a Rs 10,000 UPI transaction: Nowadays, UPI is being used for transactions ranging from Rs 10 for tea to Rs 80,000 for phones. Changes in MDR rules effective from October 15th require merchants to pay a fee for UPI payments over Rs 2,000, leading some shopkeepers to decline payments exceeding this amount. Let’s calculate how much a shopkeeper would receive for a Rs 10,000 UPI payment.

The recent modifications to MDR regulations for UPI merchant transactions have raised questions. While UPI transactions are still free for customers on average, merchants might have to bear MDR costs for certain Person-to-Merchant (P2M) transactions exceeding Rs 2,000.

What is the MDR on a Rs 10,000 UPI payment?

The government recently announced alterations to MDR charges for UPI, with a 0.4% MDR applying to specified P2M transactions over Rs 2,000 starting October 15th. However, small merchants have been granted some relief, with zero MDR set for transactions up to Rs 1 lakh monthly through UPI QR codes.

To illustrate, if a UPI payment of Rs 10,000 is made to a merchant subject to a 0.4% MDR, the merchant would incur an MDR of Rs 40. This cost covers the merchant payment system, not imposed as a government tax and not to be borne by the customer. Therefore, the customer would only pay Rs 10,000 through UPI for goods amounting to Rs 10,000 at the shop.

It’s important to note that GST is not applicable on the entire Rs 10,000 UPI transaction but only on the MDR. For instance, if the MDR is Rs 40 and an 18% GST is applicable, the GST would be Rs 7.20. Therefore, the total cost would be Rs 47.20. However, the actual deducted amount may vary based on bank settlements and contractual agreements between payment service providers and merchants.

Furthermore, the 0.4% MDR is not a uniform rule for all transactions. A fixed MDR of Rs 5 per transaction has been established for UPI transactions over Rs 2,000 in essential sectors like railways, telecom, insurance, fuel, and agricultural inputs. Conversely, the MDR for transactions involving mutual funds, securities, stockbrokers, and dealers is 0.02%, capped at ₹300 per transaction.