Govt to bear MDR on tax payments up to Rs 1 lakh via debit card

The Dollar Business Bureau

The Finance Ministry on Thursday said it will make a budgetary provision for reimbursement of Merchant Discount Rate (MDR) charges that are pertinent to banks for payments of government dues of up to Rs.1 lakh by debit cards. 

The decision has been taken with an aim to promote digital transactions. The MDR charges will be applicable on debit card payments up to Rs.1 lakh for tax, non-tax and other related payments to the central government.  

"The Budget Division will make the necessary budget provision under relevant head of Account in the Demand for Grants of the Department of Economic Affairs...for payment of MDR charges, as applicable, in respect of all receipt transactions of government...," the Ministry of Finance said in a circular.

The banks collecting dues, in forms of tax revenue or other receipts through debit/credit cards would be required to submit the claims of MDR charges to RBI periodically.

The Reserve Bank of India (RBI) will reimburse banks' claims of MDR charges on government receipt transactions. After the government demonetised Rs.500 and Rs.1000 rupee notes, it recently waived off service charges on card payments of up to Rs 2,000.  

The government has also been offering discounts on buying diesel and petrol through cards as also on insurance products.

MDR is a fee that the banks charge from a merchant for providing debit and credit card facilities.