No MDR-related discussion in GST Council; states flag concerns

A state finance minister said some states were opposed to imposing GST on MDR on UPI transactions and wanted the rate reduced from the current 18% to 5%

New Delhi: Union Minister for Finance and Corporate Affairs Nirmala Sitharaman during the 57th meeting of the Goods and Services Tax (GST) Council, Center-Center-Delhi

There was no discussion on the Goods and Services Tax (GST) on Merchant Discount Rate (MDR) at the 57th GST Council meeting held on Thursday, the Finance Ministry confirmed. However, sources said some states flagged concerns over the 18% GST levied on MDR, particularly on UPI transactions.

“There was no MDR-related discussion in the GST Council meeting today,” Finance Minister Nirmala Sitharaman said at a press briefing following the meeting.

A state finance minister said some states were opposed to imposing GST on MDR on UPI transactions and wanted the rate reduced from the current 18% to 5%.

The GST rate on MDR remains unchanged at 18%, as the Council kept tax rates largely unchanged and focused on compliance and ITC-related reforms. Under the proposed UPI framework, an MDR of 0.4% is proposed on specified person-to-merchant transactions above Rs 2,000, subject to certain caps and exemptions. MDR is treated as a service for GST purposes and is currently taxed at 18%.

The rollout of MDR was initially scheduled for October 15 but has now reportedly been deferred to January 1, 2027.