The UPI merchant fee (MDR), explained

What is the MDR?

The merchant discount rate (MDR) is the fee a business pays its bank or payment provider for accepting a payment. Card payments have carried an MDR for years. Bank-account UPI payments to merchants have had zero MDR since 2020:

Since January 2020, no MDR may be charged on BHIM-UPI P2M transactions (s.10A PSS Act). Zero MDR does not by itself prevent a payment gateway from charging a platform/technology fee — several gateways publish one.

What has been announced

In September 2026 the government and NPCI announced a UPI MDR for some merchant payments. For a standard merchant receiving UPI directly into a bank account, the announced fee is:

up to ₹2,000: 0% · above ₹2,000: 0.4% (cap ₹300) + 18% GST

The announcement also covers:

• Essential sectors: Flat ₹5 per transaction above ₹2,000 for listed essential and thin-margin sectors. Education is described as “flat-fee structures or capped processing rates” with no amount stated.
• Small merchants: Zero MDR on all P2PM transactions. A merchant with inward UPI credit above ₹1 lakh per month for 3 consecutive months moves to the P2M category. GST registration is not required for P2PM.
• Customers can’t be charged it: Merchants cannot pass MDR on to customers. UPI app providers are prohibited from imposing platform fees or hidden charges on users.

Why it isn’t charged yet

The fee was due to start on 15 Oct 2026. On 13 Oct 2026 NPCI deferred it to after Diwali, on a date to be notified. NPCI says its UPI and Services Steering Committee decided this “keeping in mind the festive season”. Until NPCI announces that date, the fee in force today for bank-account UPI to a merchant is 0% + 18% GST, and that is what Clarifee’s calculator uses.

What it would cost you

Try the calculator below. It shows today’s fee; switch on Preview the announced fee to see what the same payment would cost once the MDR starts.

Does GST apply?

GST applies to fees like the MDR, never to the payment itself:

The Ministry of Finance (PIB, 18 Apr 2025) confirms “GST is levied on charges, such as the Merchant Discount Rate (MDR)”. No UPI-specific rate or exemption has been notified, and the ₹2,000 card exemption does not cover UPI by its wording, so 18% applies by default.

What about payment gateways?

Some payment gateways, such as Razorpay and Cashfree, publish their own fee for UPI payments. How those fees will relate to the new MDR, and whether gateways will add it on top, hasn’t been officially stated. Compare gateways’ UPI fees on their charges pages.

What to do now

1. Nothing changes today: UPI payments into your account still carry no MDR.
2. Check whether you’re a small merchant, since small merchants stay on zero MDR.
3. Watch Updates. We’ll update this guide and the calculator the day NPCI announces the start date.