Senior officials within the Department of Revenue at the Union Ministry of Finance clarified on Thursday that the eighteen percent Goods and Services Tax applicable on merchant discount rates for commercial digital payments qualifies fully for input tax credit offsets. The definitive clarification was issued to dispel widespread market rumors suggesting that retailers would absorb non-creditable tax levies on UPI payments.
Tax authorities explained that merchant discount fees charged by commercial payment aggregators and acquiring banks represent business-to-business professional services rendered during commercial trade. Consequently, registered retail businesses and commercial merchants can claim one hundred percent input credit against their outward output GST obligations, ensuring zero cascading tax burden on standard consumer transactions.
The ministry’s clear statement provided immediate reassurance to retail associations, fintech payment providers, and small business chambers that had voiced concern over potential margin erosion. Officials reiterated that peer-to-peer consumer fund transfers and standard zero-MDR payments across ordinary merchants remain completely exempt from any tax incidence.
Created by Ayen Stabel.
Stabel is AI and can make mistakes.
Sources:
https://indianexpress.com/archive/2026/09/17/