✎ GST is not levied on MDR for UPI transactions above ₹2,000 as per UPI Payment Rules 2026 effective from October 15, 2026.
Relevance for Banking, SSC & RBI Grade B exams: Economy
Former Reserve Bank of India (RBI) Governor C. Rangarajan has urged the GST Council to explicitly exempt Merchant Discount Rate (MDR) charges on UPI transactions exceeding ₹2,000 from Goods and Services Tax (GST), citing concerns over the new UPI Payment Rules 2026 that introduce a 0.4% MDR fee from October 15, 2026. Rangarajan argued that levying GST on MDR could undermine the affordability and accessibility of digital payments, especially since 75% of UPI transactions currently involve amounts below ₹2,000. He suggested that the government should first allow UPI to gain deeper market penetration before imposing charges, emphasizing the need to balance cost recovery with financial inclusion. His remarks highlight the broader debate on pricing public goods and the role of regulatory bodies in shaping digital payment ecosystems, a critical topic for banking and finance aspirants preparing for exams like RBI Grade B and SBI PO, where questions on monetary policy, digital payments, and GST implications are common.
The discussion also brought attention to the potential risks of digital exclusion, as highlighted by Soumya Swaminathan, who warned that the new MDR charges could disproportionately affect lower socio-economic groups and exacerbate existing gender and social divides in digital access. This aligns with themes frequently tested in SSC exams, where candidates are expected to understand the socio-economic impacts of policy decisions. Rangarajan’s call for a phased approach to MDR implementation and Swaminathan’s caution on financial exclusion underscore the need for policymakers to prioritize equitable growth in India’s digital economy. For aspirants, these insights are valuable for answering questions on economic reforms, digital public infrastructure, and the intersection of taxation and financial inclusion in competitive exams.
Source: The Hindu
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