The headline rate is not the cost
Indian gateways advertise around 2% per transaction. That figure is real but incomplete. What actually leaves your money is the transaction fee, plus GST on that fee, plus anything you are charged for settlement, refunds or disputes.
Start with a single ₹10,000 order.
₹10,000 order at a 2% rate
- Order value
- ₹10,000.00
- Gateway fee at 2%
- ₹200.00
- GST at 18% on the fee
- ₹36.00
- Total deducted
- ₹236.00
- Settled to your account
- ₹9,764.00
The effective cost is 2.36%, not 2%. The GST on the fee is claimable as input tax credit if you are registered — which is a concrete reason to register even below the threshold, and worth ₹4,320 a year on ₹20 lakh of collections.
Rates vary by payment method
| Method | Typical rate | Notes |
|---|---|---|
| UPI | 0% – 0.4% | Often free below a notified value; cheapest by a wide margin |
| RuPay debit | 0% – 0.5% | Regulated low, sometimes nil |
| Other debit cards | 0.4% – 0.9% | Capped by regulation for smaller values |
| Credit cards | 1.8% – 2.5% | The band the headline rate refers to |
| Net banking | 1.5% – 2% | Often a flat fee on small values |
| Wallets | 1.5% – 2% | Varies by wallet |
| International cards | 3% – 4% | Plus currency conversion |
This is why blended rate matters more than headline rate. A business collecting mostly by UPI pays a fraction of one collecting mostly by credit card, on identical revenue.
Working out your real blended rate
Take last month's collections, split by method, and weight the rates.
₹10,00,000 collected in a month
- UPI — 60% at 0%
- ₹0
- Debit — 15% at 0.6%
- ₹900
- Credit — 20% at 2%
- ₹4,000
- Net banking — 5% at 1.8%
- ₹900
- Fees before GST
- ₹5,800
- Blended rate
- 0.58%
Under one percent, against a 2% headline. A business assuming 2% would overstate its cost by more than triple — and price accordingly.
What else to check before signing
- Setup and annual maintenance fees. Often waived, sometimes not. Ask in writing.
- Settlement cycle. T+2 is standard, T+1 usually costs extra, and instant settlement costs more again. On thin margins the cash flow difference matters more than the fee.
- Refund charges. Some gateways keep the original fee on a refunded transaction. On a high-return category this is a real cost.
- Chargeback fees. Typically ₹500 to ₹1,500 per dispute, charged whether or not you win.
- Minimum monthly volume. Some negotiated rates carry one; falling below it moves you to standard pricing.
- International acceptance, if you sell abroad — and the FIRC or FIRA documentation you will need for export of services.
Negotiating the rate
Rates are negotiable above roughly ₹10 lakh a month, and gateways expect the conversation. Three things give you leverage: consistent monthly volume, a low chargeback rate, and a competing written quote.
Ask specifically for a method-wise rate card rather than a blended number. A gateway offering 1.75% blended may be more expensive than one offering 2% on credit cards and nil on UPI, depending entirely on your mix.
Note
Whatever rate you land, put it in your pricing. On a 30% gross margin, a 2.36% payment cost consumes nearly eight percent of your profit on every order. Model it with the Profit Margin Calculator before deciding it is too small to matter.
One thing worth saying plainly
Payment aggregation in India is regulated by the RBI, and only licensed entities may operate as payment aggregators. You cannot build your own gateway to save the fee. What you can do is shift your mix toward UPI, which is where the cost difference actually lives.
Frequently asked questions
What do payment gateways charge in India?
Around 2% on credit cards, 0.4% to 0.9% on debit, and often nil on UPI. Add 18% GST on the fee itself, which is claimable as input tax credit if you are registered.
Why is my settlement less than the order value?
The gateway fee plus GST on that fee is deducted before settlement. On a ₹10,000 order at 2%, you receive ₹9,764.
Can I negotiate gateway rates?
Yes, generally above about ₹10 lakh a month. Consistent volume, a low chargeback rate and a competing written quote are what move the number.
Is UPI really free for businesses?
For many merchant categories and transaction values, yes or close to it. It is by a wide margin the cheapest method, which is why your payment mix matters more than the headline rate.
Can I build my own payment gateway?
No. Payment aggregation in India requires an RBI licence. Businesses use a licensed gateway or a licensed aggregator's platform.