\nNet monthly cost including failures<\/strong><\/td>\n\u20b913,216<\/strong><\/td>\n| \u20b938,019<\/strong><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n The five-percentage-point success rate gap is illustrative. Actual gaps between providers vary by payment method, bank mix, and time of day. Even a two-percentage-point gap on \u20b95 lakh GMV costs \u20b910,000 a month in unrealised revenue, which still exceeds the \u20b9197 monthly fee difference between the two structures above.<\/p>\n The zero-AMC structure is worth roughly 0.83 percentage points at \u20b91,00,000 monthly GMV against a \u20b99,999 annual maintenance fee. For teams comparing routing depth, our note on AI-powered dynamic routing<\/a> explains how terminal selection works, and our primer on UPI transaction charges<\/a> covers the broader fee landscape.<\/p>\nHow Do You Calculate Your Own Blended Effective UPI Rate?<\/h2>\nYour blended effective UPI rate equals 0.4% multiplied by the share of GMV above \u20b92,000, plus your gateway platform fee, plus 18% GST on both fees, plus fixed fees divided by monthly GMV, minus input tax credit you can claim if GST-registered. Most merchants land between 2.1% and 2.6%.<\/p>\n Blended rate = (0.4% x share of GMV above \u20b92,000) + platform fee % + 18% GST on both + (AMC \/ monthly GMV)<\/p>\n Worked Example: A \u20b95 Lakh per Month D2C Merchant<\/h3>\nAssume 60% of GMV sits above \u20b92,000 and a 2% platform fee.<\/p>\n \n\n\n| Cost Layer<\/th>\n | Basis<\/th>\n | Amount<\/th>\n<\/tr>\n<\/thead>\n | \n\n| GMV above \u20b92,000 (60% of \u20b95,00,000)<\/td>\n | \u20b93,00,000<\/td>\n | –<\/td>\n<\/tr>\n | \n| NPCI MDR at 0.4%<\/td>\n | On \u20b93,00,000<\/td>\n | \u20b91,200<\/td>\n<\/tr>\n | \n| Gateway platform fee at 2%<\/td>\n | On full \u20b95,00,000<\/td>\n | \u20b910,000<\/td>\n<\/tr>\n | \n| GST at 18%<\/td>\n | On \u20b911,200 in fees<\/td>\n | \u20b92,016<\/td>\n<\/tr>\n | \n| AMC (zero-AMC structure)<\/td>\n | –<\/td>\n | \u20b90<\/td>\n<\/tr>\n | \nTotal monthly deduction<\/strong><\/td>\n| <\/td>\n | \u20b913,216<\/strong><\/td>\n<\/tr>\n\nBlended effective rate<\/strong><\/td>\n| <\/td>\n | 2.64%<\/strong><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n If the same merchant carried a \u20b99,999 annual AMC, the blended rate climbs to roughly 2.81%. If the merchant is GST-registered and claims eligible input tax credit on the \u20b92,016, the net payment cost falls to \u20b911,200, or 2.24% of GMV.<\/p>\n PRO-TIP:<\/strong> If you are GST-registered, budget the net cost, not the gross. The 18% GST on MDR is claimable as input tax credit for eligible registered merchants, per Free Press Journal’s coverage. Unregistered merchants above the small-merchant threshold absorb it fully. That is a compliance decision, not a gateway decision.<\/p><\/blockquote>\nCompliance Checklist: What Changes in Your Reconciliation and GST Filing From October 15, 2026<\/h2>\nFrom October 15, 2026, your settlement reports will carry a new MDR deduction on eligible transactions above \u20b92,000. You need to update your reconciliation to expect that variance, confirm your merchant category with your acquiring bank, and claim GST input tax credit on the MDR fee if you are registered.<\/p>\n \n- Confirm your P2PM versus P2M classification with your bank or gateway before the effective date.<\/li>\n
- Verify your MCC classification. The flat \u20b95 categories are the most common miss.<\/li>\n
- Update reconciliation workflows to expect a new deduction on every eligible transaction above \u20b92,000.<\/li>\n
- Collect GST-compliant invoices from your gateway, or input tax credit is not claimable.<\/li>\n
- Do not pass MDR to customers as a surcharge. The framework explicitly disallows it.<\/li>\n
- Confirm in writing whether your provider shows MDR as a separate settlement line or bundles it into the platform fee.<\/li>\n
- Ask whether your settlement file distinguishes bank-account UPI from credit-linked UPI, since they price differently.<\/li>\n
- Re-run unit economics on high-ticket SKUs where 0.4% now bites into a thin margin.<\/li>\n<\/ol>\n
Teams running more than one provider should standardise this in one place, which our note on unified settlement reporting<\/a> addresses.<\/p>\nFrequently Asked Questions<\/h2>\nIs UPI still free for merchants in 2026?<\/strong><\/h3>\nNot entirely. UPI stays free for consumers and P2P transfers, and merchants stay free below \u20b92,000 or under the P2PM small-merchant exemption. Above \u20b92,000, standard P2M merchants pay 0.4% MDR, capped at \u20b9300, from October 15, 2026.<\/p>\n What is the difference between UPI MDR and my payment gateway’s platform fee?<\/strong><\/h3>\nUPI MDR is the regulated 0.4% network fee, identical across every gateway. Your gateway’s platform fee is a separate commercial charge covering checkout infrastructure, routing, and settlement, with GST on top. Both apply to the same transaction, stacked.<\/p>\n Can I split a large payment into smaller sub-\u20b92,000 transactions to avoid MDR?<\/strong><\/h3>\nThis is not a sanctioned workaround. Acquiring banks monitor transaction patterns and monthly velocity, so structuring payments to evade classification thresholds invites scrutiny and does not change your underlying merchant category.<\/p>\n Does UPI MDR apply to subscription or Autopay mandate payments?<\/strong><\/h3>\nNo. Standing instructions and UPI Autopay mandates covering recurring bills, subscriptions, and recurring investments do not carry the prescribed P2M MDR under the current framework. Your provider’s own platform fee may still apply.<\/p>\n How is GST calculated on UPI MDR?<\/strong><\/h3>\nGST at 18% applies to the MDR fee amount, not the transaction value. On a \u20b93,000 payment, MDR is \u20b912, and GST on that \u20b912 is \u20b92.16. Eligible registered merchants can claim it as input tax credit.<\/p>\n Which payment gateway offers the lowest effective UPI cost in India right now?<\/strong><\/h3>\nThe lowest effective cost combines zero AMC, zero setup fee, strong success rates and clear MDR reporting. Razorpay charges a 2% platform fee plus GST with no annual or setup charges. At \u20b91 lakh monthly GMV, a zero-AMC structure is worth roughly 0.83 percentage points against a \u20b99,999 annual fee.<\/p>\n Will my settlement report show MDR as a separate line?<\/strong><\/h3>\nThat varies by provider. Some itemise the NPCI MDR separately from the platform fee; others bundle both. Ask your gateway before October 15 so your reconciliation logic matches the file format you will receive.<\/p>\n The new MDR does not change the question merchants should be asking. It sharpens it. The rate card was never the whole cost, and now there is one more regulated layer sitting underneath it. Razorpay prices UPI with a 2% platform fee plus GST, zero setup fee, zero AMC, and transparent reporting of the NPCI pass-through in your settlement files, so the number you model is the number you pay.
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