There should be no GST on MDR for UPI transactions: C. Rangarajan

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Dignitaries at the launch of the book, Cashless Nation: How UPI Changed Everything, in the city on Monday. | Photo Credit: B. VELANKANNI RAJ

The GST Council should come out with a clear statement that it would not levy tax on the Merchant Discount Rate (MDR) fees to be paid by the merchants for UPI transactions above ₹2,000, C. Rangarajan, former Governor, Reserve Bank of India, said here on Monday.

“I would urge that the GST Council, which is meeting in one or two days from now, must clearly come out and say that GST should not be levied,” he said, at the launch of a book on 10 years of UPI roll out. The new UPI Payment Rules 2026 stipulates a 0.4% MDR fee for person-to-merchant transactions above ₹2,000 from October 15, 2026.

While maintaining that there were no ground rules over pricing of public good, Dr. Rangarajan wondered whether it was the correct time to levy MDR, when 75% of the UPI transactions were below ₹2,000. “Perhaps one could have waited for some more time and then levied charges after it has completely taken roots,” he said. In the 10 years of its existence, UPI has progressed well in the country through the good work put up by the National Payments Corporation of India (NCPI). He, however, said that there was a cost involved in running the system and it must be recouped.

“It can be recouped at a time when it is really considered to be appropriate.”

Soumya Swaminathan, Chair, M.S. Swaminathan Research Foundation, and former Chief Scientist, World Health Organisation, cautioned about financial exclusion of people due to the digital divide. She said it was well known that the gender divide was quite high in terms of digital access, especially among the lower socio-economic groups. While AI brings with it scope in several disciplines, such as education, health, agriculture, or climate resilience, “we have to keep in mind are we reaching everybody or are we further excluding those who are excluded from the system”.

Deep divides on gender and social equity exist today and it was important to track those metrics as the country expands its digital public infrastructure, she added.

V. Kamamoti, Director, IIT-M, said that the roll out of UPI demonstrated three things – scale, equity, and democratisation of opportunity.

The book – Cashless Nation: How UPI Changed Everything – is authored by Santanu Paul, computer scientist and entrepreneur and an IIT-M alumnus, and B. Sambamurthy, a retired banker and former Chairman of NPCI. It throws light on the various institutional, policy, and regulatory aspects of UPI as also the contestations, between banks and fintechs for example, and how the NPCI resolved all those.

Sundaraman Ramamurthy, MD and CEO, Bombay Stock Exchange, and Ashwin Mahalingam, Dean – Alumni and Corporate Relations, IIT-M, also spoke.

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