UPI Merchant Fee Starts October 15: What Indian Online Stores Should Do Before Diwali
October 1, 2026 (updated October 2, 2026)
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UPI has cost merchants nothing since January 2020. On October 15 that ends for payments above ₹2,000, and if your online store sells things priced in the thousands, you’ll see it on your next settlement report.
It’s a modest fee, but it lands just over three weeks before Diwali, and how it shows up in your payments depends on your gateway. Here’s what’s changing, whether it applies to a store like yours, and what to sort out before the 15th.
What changes on October 15
Merchants will pay 0.4% on UPI payments above ₹2,000. The fee is charged on the whole payment, not just the part above ₹2,000, and it stops growing at ₹300 once a payment reaches ₹75,000. Payments of ₹2,000 or less stay free.
A handful of sectors pay a flat ₹5 instead (railways, telecom, insurance, fuel and public utility bills), and capital-market payments such as mutual funds pay 0.02%. None of that applies to a typical online store, so 0.4% is the number to plan around.
Customers pay nothing extra. Merchants aren’t allowed to pass the fee on to them, and UPI apps can’t add platform fees of their own. Two things sit outside the new fee entirely: UPI AutoPay mandates, which cover subscription-style billing, and RuPay credit cards linked to UPI, which follow card pricing instead.
The Ministry of Finance says the fee will touch only about 4% of merchant payments. That’s a count, not a value. Most UPI payments are small, but a store selling ₹3,000 baskets is firmly inside that 4%.
GST at 18% is charged on the fee as well, so what actually leaves your settlement is a little more than the headline rate:
| Payment | Fee (0.4%) | GST on the fee | Total deducted |
|---|---|---|---|
| ₹2,000 or less | ₹0 | ₹0 | ₹0 |
| ₹3,000 | ₹12 | ₹2.16 | ₹14.16 |
| ₹10,000 | ₹40 | ₹7.20 | ₹47.20 |
| ₹50,000 | ₹200 | ₹36 | ₹236 |
| ₹75,000 and above | ₹300 (capped) | ₹54 | ₹354 |
If you’re registered for GST, you can generally claim that GST back as input credit. If you’re not, it’s a real cost. The GST Council meets on October 7, and Moneycontrol reported that relief for small unregistered merchants may come up. Until something is decided, assume you’ll pay it.
Does it apply to your store?
Almost certainly. The exemption is for small vendors who collect through a UPI QR code straight into a personal bank account, up to ₹1 lakh a month. Think of the tea stall or the neighbourhood tailor. A store that takes UPI at checkout through a payment gateway is a regular merchant, and the exemption wasn’t written for it.
The edge case is a very small seller who takes orders on Instagram or WhatsApp and collects on a personal QR code. Under ₹1 lakh a month, you’re exempt. Stay above it for three months in a row and your bank moves you to a regular merchant account. If you’re not sure which side you’re on, ask your bank or gateway. Your classification is theirs to confirm, so don’t guess it from your turnover.
Your gateway’s fee comes on top
If you use a payment gateway, UPI isn’t free for you today either. Gateways charge their own platform fee on UPI payments (Razorpay, for example, lists 2% plus GST). The new 0.4% is a separate network charge that sits on top of that, and no gateway can discount it.
What differs between providers is how it appears. Razorpay says it will show the 0.4% as its own line in settlement reports, and its guide notes that some providers fold it into their rate instead. Neither is wrong, but find out which one you’ll get before your accountant sees a settlement that’s smaller than expected.
Work out what it will cost you
Take a made-up store with 1,500 UPI orders a month at an average of ₹3,500. Each order pays ₹14, so the fee comes to ₹21,000 a month, plus ₹3,780 in GST if you can’t claim it back. Whether that hurts depends on your margin. At a 10% net margin it takes about 4% of your profit, and at 5% it takes about 8%.
To get your own figure, export the last 90 days of paid orders from your store or gateway dashboard and keep the UPI ones above ₹2,000. Add up their value, multiply by 0.4%, and divide by three for a monthly number. Use what the customer actually paid, shipping included, because that’s the payment the fee is charged on.
What we’d do before Diwali
- Ask your gateway three things, and get the answers in writing. How are you classified? Will the 0.4% appear as a separate line or be folded into their fee? Does their own pricing change on October 15?
- Decide how you’ll handle it before the festive rush, not during it. You can absorb the cost, raise prices slightly on higher-value items, or adjust your free-shipping threshold. What you can’t do is add a UPI surcharge, because the rules prohibit it. If you’re considering something cleverer, like a discount for another payment method, check with your gateway first.
- Don’t make UPI harder to use. For context, the government puts credit card fees at 1.5% to 2.5% and debit cards at up to 0.9%, so UPI is still the cheapest way for you to get paid. A buried or clunky UPI option will cost you more in abandoned carts than 0.4% ever will. And don’t split one order into smaller payments to stay under ₹2,000. Banks and gateways watch payment patterns, and it makes checkout worse for your customers.
- Tell your accountant. Settlements will carry a new deduction on orders above ₹2,000. If you’re GST-registered, ask your gateway for the GST invoice you’ll need to claim the credit.
- Test a full UPI payment before the 15th and again after. Use an ordinary mid-range phone on mobile data, the way most of your customers will. Our Diwali e-commerce checklist covers the rest of the pre-season checks.
The WhatsApp change is already live
This one is separate from UPI, but it started the same month. If you only use the regular WhatsApp Business app, nothing has changed for you and you can skip this section. If you use the WhatsApp Business API through a provider, Meta’s new pricing took effect on October 1.
Each business number still gets 1,000 free service replies a month. Those are the free-form replies you send after a customer messages you. After that, every delivered reply is billed. Order and delivery updates sent as utility templates inside the 24-hour chat window used to be free. They’re now billed from the first message, and the 1,000 free replies don’t cover them.
The rate depends on the country and on your provider. For India, providers are quoting roughly ₹0.115 to ₹0.145 per message, so this is paise, not rupees: 10,000 billable messages comes to about ₹1,150 to ₹1,450. The bigger effect is on how you build the conversation. A chatbot that sends four short replies now costs four times what one complete reply does. Ask your provider for your exact rate, and if you’re deciding how much of your customer contact to route through WhatsApp, our piece on WhatsApp versus a contact form covers where each one fits.
Dates to keep in mind
- October 7: GST Council meets. Relief on GST for the fee may be discussed.
- October 15: the UPI merchant fee starts.
- November 6: Dhanteras, traditionally a big shopping day.
- November 8: Diwali.
Where that leaves you
This fee is narrower than the headlines made it sound. The stores that get caught out will be the ones who first notice it on a settlement report in the middle of a sale. You have less than two weeks, which is enough time to ask the questions, run the numbers and decide.
If you’d like a second pair of eyes on your checkout, payment setup and hosting before the festive traffic arrives, get in touch.
Sources: the Department of Financial Services’ FAQ on UPI merchant discount rates (15 September 2026); Inc42’s report on the NPCI and Finance Ministry announcement; Razorpay’s guide to how gateways apply the fee (a gateway’s own view, so check your provider’s terms); AiSensy’s explainer on Meta’s October 1 WhatsApp pricing; Moneycontrol’s report on the GST Council agenda. Rules, rates and dates can change, so confirm current details with your payment provider and your accountant before acting.