Government is mulling to scrap Merchant Discount Rate on debit cards

The government is considering the scrapping the Merchant Discount Rate (MDR) applicable to all debit card transactions. The move would be in line with the scrapping of MDR or any other charges on transactions through debit card powered by RuPay, BHIM-UPI and BHIM-UPI QR Code. 

In the Finance (No. 2) Act, 2019, a new section 269SU was introduced to increase the scope of digital payments. The Section mandates every business establishment with total sales, turnover or gross receipts from business exceeding Rs 50 crore in the preceding year to accept customer payments through RuPay, BHIM-UPI and BHIM-UPI QR Code.

Also Read: Pay your income tax through UPI, credit cards and mobile wallets

The government waived the MDR on the modes of payments prescribed under section 269SU. Similarly, the government could consider the possibility of waiving MDR on all debit card transactions. There may be an announcement to this effect in the upcoming Union Budget of 2020.

Most commercial banks are expecting compensation from the government for the loss of MDR or bank charges. The compensation may cost the government about Rs 2,000 crore annually.

For any clarifications/feedback on the topic, please contact the writer at sweta.dugar@cleartax.in

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