SEBI To Examine UPI Fee Issues Raised By Stockbrokers; 18% GST On MDR To Apply From October 15
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SEBI will examine UPI fee concerns raised by stockbrokers as the revised MDR framework takes effect on October 15, with 18% GST applicable on MDR charges.
The Securities and Exchange Board of India (SEBI) will examine concerns raised by stockbrokers over fees associated with UPI transactions, SEBI Chairman said, as a new framework for merchant payments is set to take effect from October 15.
The development comes as the government has clarified that an 18% Goods and Services Tax (GST) will apply to the Merchant Discount Rate (MDR) charged on certain UPI merchant transactions. The tax will be levied on the MDR component and not on the underlying value of the UPI payment, according to a CBIC official cited by NDTV Profit.
Under the revised framework, UPI person-to-merchant (P2M) transactions above ₹2,000 will attract an MDR of 0.4%, subject to prescribed caps. The merchant, rather than the customer, bears the MDR.
For example, on an eligible UPI payment of ₹10,000, an MDR of 0.4% would amount to ₹40. GST at 18% on the MDR would add ₹7.20, taking the total MDR-related cost to ₹47.20. A GST-registered merchant may be able to claim the ₹7.20 GST as input tax credit, subject to applicable conditions. Merchants dealing in exempt supplies may not be able to claim or fully utilise the credit.
UPI MDR Charges For Stockbroking And Other Transactions
The revised charges also provide for concessional MDR rates for certain categories. Transactions linked to capital-market services, including mutual funds and stockbroking, will attract an MDR of 0.02%, subject to a maximum charge of ₹300.
The fee structure has raised concerns among stockbrokers, particularly over the impact of transaction-related charges on payments routed through UPI. SEBI's decision to examine the issue could lead to further clarity on how the charges will apply to market participants.
For other specified categories such as railways, telecom, fuel and insurance, a flat ₹5 fee will apply to transactions above ₹2,000.
Most routine UPI merchant payments will continue to remain outside the MDR charge. Small merchants collecting up to ₹1 lakh a month through UPI QR codes will also remain exempt under the framework. According to officials, this provision covers around 96% of merchant transactions.
Person-to-person UPI payments will continue to remain outside the MDR framework. UPI QR payments made to merchants in rural and semi-urban areas will also remain free.
The revised system additionally provides for 5% of MDR collections to be channelled into a dedicated fund aimed at expanding UPI acceptance among small merchants.
With SEBI now set to examine the concerns raised by stockbrokers, the treatment of UPI-linked charges in capital-market transactions is likely to receive further regulatory attention ahead of the October 15 implementation.
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This article is for informational purposes only and should not be considered investment advice from Kotak Neo. For compliance T&C and disclaimers, Visit www.kotakneo.com/disclaimer
Rochelle Britto has spent 8+ years decoding India's markets, businesses, and consumer economy, reporting for ET Prime and Times Internet along the way, covering the stories behind the numbers.
A Mumbai native and perpetual planner of the next holiday, she stays far, far away from the eternal question, “Where are we going next?” When she's not chasing headlines, she's chasing new cultures, open roads, and a bit of quiet in nature.
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