Merchant of record vs payment gateway, for Indian software businesses

A payment gateway takes the payment. A merchant of record takes the liability.

If you are building software in India and expect customers abroad, the payments decision is harder than the product decision, and it is not really about fees.

This is written from setting it up for Zymura. It is not tax advice and I am not an accountant — the point is to describe the shape of the decision so you know what to ask a professional about.

The problem nobody mentions until later

Sell a subscription to a customer in Germany and, depending on thresholds and rules that vary by country, there may be VAT to account for in Germany. Sell to the UK, the same question arises separately. That obligation exists regardless of which payment provider processed the card.

A payment gateway is a pipe. It moves money and hands you the compliance question. That is fine at zero international customers and becomes a genuine problem at some number greater than zero, which is difficult to predict in advance.

What a merchant of record changes

An MoR is the legal seller. The customer's contract is with them; they issue the invoice, they calculate and remit the sales tax in the customer's jurisdiction, and they carry that liability. You are selling to the MoR, in effect, and they sell to the end customer.

The trade is straightforward:

• You give up: a few percent in fees over a plain gateway, some control over the checkout experience, and direct ownership of the customer billing relationship.
• You get back: not having to track thresholds across dozens of jurisdictions as a one-person business.

For a solo founder selling globally, that is usually the right trade. For a domestic-only business it very likely is not — an Indian gateway is cheaper and the cross-border question does not arise.

The thing that surprised me: pricing is not conversion

This is the part I had not anticipated and it changes how you configure everything.

Showing ₹399 to an Indian visitor and $9 to an American one is not the same as showing $9 converted at today's rate. ₹399 is a price point chosen for the Indian market. At an FX rate it would be roughly $4.50, and $9 converted would be roughly ₹790 — neither of which is what you intended to charge.

What a converted price does to a local price point

Which means, in practice, that a single product priced in dollars will silently charge your Indian visitors nearly twice what your own pricing page told them. To honour genuinely local pricing you need a separate product entry per currency, per plan — five currencies across three plans is fifteen products, each created and priced individually.

Worth checking too whether your provider has an automatic currency conversion feature enabled, and what it does when it encounters a product already priced natively in the customer's currency. That behaviour determines whether your carefully chosen local price survives checkout.

A practical checklist

• Decide domestic or global first. It determines everything else.
• Check what the provider needs for onboarding. Expect identity documents, a bank account, and a live site describing the product, pricing, refunds and contact details. Having the legal pages written before you apply saves a round trip.
• Confirm what appears on the customer's statement. An unrecognised descriptor is a meaningful driver of chargebacks.
• Ask about local payment methods. In India, recurring card mandates fail often enough that UPI autopay support materially affects subscription retention.
• Build the products per currency before launch, not after someone is charged the wrong amount.
• Talk to a CA about your own position. The MoR handles the customer-side tax. It does not tell you how to treat the income you receive.

What it does not solve

An MoR removes the foreign sales tax question. It does not remove your own: the money arriving in your account is business income in India and is treated accordingly. Nor does it make you exempt from domestic registration thresholds if your turnover crosses them.

It solves one specific, genuinely difficult problem — and if you are one person shipping software to customers in a dozen countries, that is the problem most likely to catch you out.