GST Council may take up MDR taxation issue

The Central Board of Indirect Taxes and Customs (CBIC) has indicated that the GST Council may consider the taxation of Merchant Discount Rate (MDR) charged by banks to merchants. According to CBIC, any GST levied on MDR would be available as Input Tax Credit (ITC) to the merchant, potentially offsetting their tax liability.

MDR is the fee charged by banks and payment processors when merchants accept card payments. The treatment of this charge under GST has been a matter of ongoing discussion between industry stakeholders and tax authorities.