UPI Fees Will Not Be Transferred to Customers, Merchants Exempt from Additional GST: Sources

UPI Transaction Fees to Not Affect Customers, GST to Remain Unchanged for Merchants

Sources have indicated that the recent introduction of transaction fees for Unified Payments Interface (UPI) transactions, specifically on larger merchant payments, will not be passed down to consumers. Merchants will not incur any additional Goods and Services Tax (GST) obligations due to these changes.

The new structure, which marks the end of the era of free UPI transactions, will impact how large merchants handle digital payments. This decision comes alongside growing regulatory scrutiny of payment service providers and aims to improve the financial sustainability of UPI.

The Reserve Bank of India (RBI) has noted that the increase in Merchant Discount Rate (MDR) is unlikely to encourage a significant shift back to cash transactions. RBI Deputy Governor T. Rabi Sankar emphasized that despite fears among retailers and consumers about higher transaction costs, the transition to digital payment methods remains strong.

While shopkeepers have expressed concerns about safeguarding their interests amid these changes, leaders like Naveen Patnaik have stated the importance of protecting local businesses during such transitions.

In response to the fee introduction, some petrol pumps in Madhya Pradesh have announced they will not accept UPI payments for transactions above ₹2,000. The local trade body has raised concerns regarding this decision and is seeking further discussions on the implications of the new fees.

The UPI platform, which has surged in popularity for its convenience and efficiency, is nonetheless facing growing challenges as stakeholders adapt to the new cost structure. As India continues to promote a cashless economy, the balance between cost and convenience will remain a critical factor in shaping the future of digital transactions.