The customer still pays the amount on the bill. From 15 October 2026, the shop may not receive that full amount on UPI. WhatsApp forwards will say UPI is no longer free. For the person at your counter, that is false. For the shop, it is sometimes true, and only on some bills.
At a glance
- What. 0.4% merchant discount rate on eligible person-to-merchant UPI above Rs 2,000. Capped at Rs 300 from Rs 75,000.
- When. 15 October 2026, per the NPCI FAQ dated 15 September 2026.
- Who pays. The merchant. NPCI says the customer pays the posted price, and apps cannot add a platform fee.
- Who does not. Person-to-person UPI at any amount. P2M of Rs 2,000 or less. P2PM shops taking up to Rs 1 lakh a month on UPI QR into their own account.
- Medicines. Not on the Rs 5 essential-sector list. A P2M chemist pays the standard 0.4%.
What did not change
On 15 September 2026 the Ministry of Finance said UPI stays free for every person-to-person transfer, and that about 96% of merchant transactions are untouched because they sit at Rs 2,000 or below. MDR is not a tax. The government and NPCI do not keep it. Banks and UPI app providers share it.
NPCI's FAQ is blunter on the customer side. Ordinary users pay nothing to scan a QR. There is no monthly quota of free UPI for a person. UPI apps are barred from charging a platform fee on a UPI payment. Existing QR standees and soundboxes keep working. You do not reprint the board.
That is the part the forwards get wrong. The part they skip is which QR the money lands in.
The check that decides your cost
GST on the shop does not decide this. NPCI says zero-MDR under the P2PM tier depends on monthly UPI collections and how the bank has classified the account, not on GST registration.
P2PM
Person-to-person-merchant is NPCI's bucket for small vendors who take UPI QR into their own account, up to Rs 1 lakh a month. Those collections stay at zero MDR, including a bill above Rs 2,000. A quiet counter still on a personal PhonePe or GPay QR, under that monthly cap, may still be here.
Stay over Rs 1 lakh a month for three months running and the acquiring bank is supposed to move the account to P2M. After that, the 0.4% rule applies.
P2M
Person-to-merchant is a merchant QR. Current-account QR, a soundbox on a merchant TID, a proper acquiring setup. On that account, each UPI above Rs 2,000 costs 0.4%, with a hard cap of Rs 300 once the payment is Rs 75,000 or more. Rs 2,000 exactly is still free.
A licensed medical shop doing real monthly volume on UPI should assume P2M, or that it will be flipped. Do not guess from the GST certificate. Ask the bank or the app that issued the QR.
What a P2M medical shop will pay
These numbers are 0.4% of the bill, with NPCI's Rs 300 cap. They apply only if the QR is P2M. On P2PM under the monthly cap, every row is Rs 0.
| Bill | Typical | MDR on P2M |
|---|---|---|
| Rs 180 | One strip | Rs 0 |
| Rs 2,000 | Exact threshold | Rs 0 |
| Rs 2,400 | Chronic refill | Rs 9.60 |
| Rs 8,000 | Discharge / multi-month | Rs 32 |
| Rs 50,000 | Distributor collecting from a retailer | Rs 200 |
| Rs 1,00,000 | Large B2B UPI | Rs 300 cap, not Rs 400 |
NPCI's own worked example is a Rs 3,000 payment costing the merchant Rs 12. Most of a retail chemist's scans will still be the first two rows. The money shows up on the chronic bill, the hospital discharge basket, and anything you collect as a round figure above two thousand.
Medicines did not get the Rs 5 rate
PIB lists a flat Rs 5 MDR, not 0.4%, for transactions above Rs 2,000 in railways, telecommunications, insurance, fuel, and agricultural inputs. That is the thin-margin and public-service list. Retail medicine is not on it. Fuel got Rs 5. An Rs 8,000 medicine bill on a P2M QR did not.
On a DPCO product the shop's margin is already small. 0.4% of the UPI collection is not a catastrophe on one bill. It is a leak on every large UPI day, and you cannot recover it at the counter.
What you must not do
Do not print "UPI charges" on the bill. NPCI FAQ question 34 says merchants cannot pass MDR to the customer. The customer pays the posted price.
Do not split a Rs 4,000 bill into two Rs 2,000 scans to dodge the rate. It slows the queue. It is fee-avoidance. This page will not walk through how to do it.
How this shows up in the bank
On a P2M collection above Rs 2,000, the credit can be the bill minus MDR. A Rs 2,400 UPI may land as Rs 2,390.40. The GST invoice to the customer is still Rs 2,400. The gap is a cost.
How you book that gap is a question for your CA. This page will not invent an HSN or an ITC claim. NPCI's worked examples do not add GST on top of the 0.4%. If your accountant says GST applies on the acquiring fee, follow that, not a blog table.
If you collect as a distributor
When a retailer pays you on UPI, you are the merchant. A Rs 50,000 collection costs Rs 200. A Rs 1 lakh collection costs Rs 300, not Rs 400. The same no-pass-through rule applies. You cannot load MDR onto the retailer's invoice as a line item.
Run the same P2M versus P2PM check on the collection QR. High monthly inward UPI will not stay in the small-vendor bucket.
Before 15 October
Ask what the QR is
Personal account P2PM, or merchant P2M. Call the bank or the app that issued it.
Check monthly UPI inward
Over Rs 1 lakh a month for three months, NPCI says the account moves to P2M.
Tell staff: no surcharge
The billed amount is the billed amount. Do not add UPI charges. Do not split bills to dodge 0.4%.
Watch settlements after 15 Oct
If the credit is short of the invoice, that short is the MDR. Take the statement to your CA.
Official sources
Use these two, not a forwarded image.
- PIB, 15 September 2026. UPI continues to remain free for peer to peer transactions and 96% of merchant transactions.
- NPCI FAQ, 15 September 2026. Merchant Discount Rate on select UPI P2M transactions.
Questions chemists ask
Will customers pay UPI MDR at a medical shop?
No. NPCI says consumers face no UPI charge, and merchants cannot pass MDR on to the customer. The customer pays the posted bill amount.
Does every UPI payment to a pharmacy now cost 0.4%?
No. Person-to-person UPI stays free at any amount. Person-to-merchant UPI of Rs 2,000 or less stays free. P2PM merchants taking up to Rs 1 lakh a month on UPI QR into their own account also stay at zero MDR. The 0.4% rate applies to eligible P2M transactions above Rs 2,000, capped at Rs 300 from Rs 75,000.
When does UPI MDR start?
The NPCI FAQ dated 15 September 2026 says the framework takes effect from 15 October 2026.
Are medicines on the Rs 5 essential-sector UPI rate?
No. The PIB list for the flat Rs 5 MDR is railways, telecommunications, insurance, fuel, and agricultural inputs. Retail medicines are not on that list.
How do I know if my shop QR is P2M or P2PM?
Ask the bank or app that issued the QR. P2PM is a personal-account QR taking up to Rs 1 lakh a month. P2M is a merchant QR. GST registration does not decide this. Three months over Rs 1 lakh inward UPI and NPCI says the account moves to P2M.
Can I add UPI charges on the customer's bill?
No. NPCI FAQ question 34 says merchants cannot pass MDR to the customer. The customer pays the posted price.
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Bills, stock, and GST. UPI stays on your QR.
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Disclaimer: This article is for general information only. It is not legal, tax, or payment-system advice. The rates and categories come from the PIB release and NPCI FAQ dated 15 September 2026. Banks apply the account classification. Refer to those official texts and your CA or acquiring bank for your shop.