Ecommerce online payment transaction charges to be removed from Jan 2018

The Government announced that the traders need not pay merchant charges up to Rs 2,000. When customers make payment to merchants through debit cards, UPI or Aadhar enabled payment systems, the Merchant discount charges (MDR) or the online payment charges will be borne by the Government.

The cap is upto Rs 2,000 for 2 years effective from 1st Jan 2018.

Each time a customer pays for the products/services digitally, the merchant pays merchant charges to the bank. The Bank fixes the MDR charges applicable.

Cabinet Meeting Chaired by PM Narendra Modi for Online Payment charges

A cabinet meeting was held today chaired by Prime Minister Narendra Modi . The decision is taken to reimburse online payment charges (MDR charges) to the bank. This initiative is taken by the Government to promote Cashless economy in India. Below are the minutes of the meeting.

“For all the transactions less than Rs 2,000 in value, the customer and the merchant will not suffer any additional burden in the form of MDR”

With regard to revenue contribution from this field, IT minister Ravi Shankar Prasad further added, digital transactions amounted to Rs 2.18 lakhs during April- Sep 2017. It is estimated to raise to Rs 4.37 lakh crore for the current financial year.

In wake of the recent developments,  The Reserve Bank of India has prescribed different MDR charges applicable to small and large traders. For an annual turnover of up to Rs 20 lakh,  RBI has fixed MDR charges at 0.40 percent with a maximum of Rs 200 per transaction on all digital transactions made by customer. For an annual turnover of more than Rs 20 Lakhs,  RBI has fixed MDR charges of 0.90 percent with maximum of Rs 1,000 per transaction. For QR code transactions the MDR charge is 0.80 percent up to maximum of Rs 1,000 per transaction.

This is welcome move made by the government to bear the MDR charges. Thereby making it easy for customers to make payments digitally as merchant payments through EDC machines and POS terminals is cheaper in comparison to cash payments.