diff --git a/.github/workflows/cypress-tests-runner.yml b/.github/workflows/cypress-tests-runner.yml
index e7aa9f1d3773..30432945e3b1 100644
--- a/.github/workflows/cypress-tests-runner.yml
+++ b/.github/workflows/cypress-tests-runner.yml
@@ -450,18 +450,14 @@ jobs:
       # - The `router` process must be killed (using SIGINT/SIGTERM) to generate the `coverage.profraw` file, otherwise the coverage will only be generated for the buildscripts
       # - Trying to generate branch coverage using "-Z coverage-options=branch" currently fails. Both grcov and cargo-llvm-cov crash when trying
       #   to process the generated `.profraw` files.
-      # - Explanation of ignore flags:
-      #   - "*cargo*"  : Exclude external crates from the generated `lcov.info` file
-      #   - "target/*" : Exclude compile time generated .rs files, e.g. isodata.rs, chrono-tz/timezones.rs
-      #   - "/*"       : Exclude /Users/../rustlib/src/rust/library/core/src/panic.rs, /Users/../rustlib/src/rust/library/std/src/sys/thread_local/native/mod.rs etc.
+      # - --keep-only argument is used to exclude external crates in generated lcov.info file (~500MiB -> ~70MiB)
       - name: Process coverage report
-        if: ${{ env.RUN_TESTS == 'true' }}
-        run: |
-          grcov . --source-dir . --output-types lcov --output-path ${{ env.CODECOV_FILE }} --binary-path ./target/debug --ignore "*cargo*" --ignore "target/*" --ignore "/*"
+        if: ${{ env.RUN_TESTS == 'true' && github.event_name != 'merge_group' }}
+        run: grcov . --source-dir . --output-types lcov --output-path ${{ env.CODECOV_FILE }} --binary-path ./target/debug --keep-only "crates/*"
 
       - name: Upload coverage reports to Codecov
         uses: codecov/codecov-action@v5
-        if: ${{ env.RUN_TESTS == 'true' }}
+        if: ${{ env.RUN_TESTS == 'true' && github.event_name != 'merge_group'}}
         with:
           token: ${{ secrets.CODECOV_TOKEN }}
           files: ${{ env.CODECOV_FILE }}
diff --git a/.gitignore b/.gitignore
index dcbeddf7adab..d53145b33ee9 100644
--- a/.gitignore
+++ b/.gitignore
@@ -241,6 +241,7 @@ $RECYCLE.BIN/
 # hyperswitch Project specific excludes
 # code coverage report
 *.profraw
+lcov.info
 html/
 coverage.json
 # other
diff --git a/docs/CONTRIBUTING.md b/docs/CONTRIBUTING.md
index 9efb6529bf19..d9314ceb9196 100644
--- a/docs/CONTRIBUTING.md
+++ b/docs/CONTRIBUTING.md
@@ -34,6 +34,7 @@ Please join us!
   - [Resolving a Bug Report](#resolving-a-bug-report)
 - [Pull Requests](#pull-requests)
   - [Cargo Commands](#cargo-commands)
+  - [Code Coverage](#code-coverage)
   - [Commits](#commits)
   - [Opening the Pull Request](#opening-the-pull-request)
   - [Discuss and update](#discuss-and-update)
@@ -232,7 +233,7 @@ To generate code coverage using the cypress tests, follow these steps:
 0. Make sure `grcov` and `llvm-tools-preview` are installed
 
    ```shell
-   rustup install llvm-tools-preview
+   rustup component add llvm-tools-preview
    cargo install grcov
    ```
 
@@ -250,7 +251,7 @@ To generate code coverage using the cypress tests, follow these steps:
    LLVM_PROFILE_FILE="coverage.profraw" target/debug/router
    ```
 
-3. Open a separate terminal tab and run the cypress tests, following the [README]
+3. Open a separate terminal tab and run the cypress tests, following the [README][cypress-v2-readme]
 
 4. After the tests have finished running, stop the `router` process using `Ctrl+C`
 
@@ -274,22 +275,22 @@ To generate code coverage using the cypress tests, follow these steps:
    rm **/*.profraw
    ```
 
+Note:
+- It is necessary to stop the `router` process to generate the coverage file
+- Branch coverage generation requires nightly and currently `grcov` crashes while trying to include branch coverage. (Checked using `--log-level` parameter in `grcov`)
+
 #### Integration with VSCode
 You can also visualize code coverage in VSCode using the [coverage-gutters](https://marketplace.visualstudio.com/items?itemName=ryanluker.vscode-coverage-gutters) extension.
 
 You need to generate an `lcov.info` file in the directory root. After following till step 4 above:
 
 ```shell
-grcov . -s . -t lcov --output-path lcov.info --binary-path ./target/debug --ignore "*cargo*" --ignore "target/*" --ignore "/*"
+grcov . -s . -t lcov --output-path lcov.info --binary-path ./target/debug --keep-only "crates/*"
 ```
 
 This will generate an `lcov.info` file that can be read by the extension.
 
-Note:
-- It is necessary to stop the `router` process to generate the coverage file
-- Branch coverage generation requires nightly and currently `grcov` crashes while trying to include branch coverage. (Checked using `--log-level` parameter in `grcov`)
-
-[README]: /cypress-tests-v2/README.md
+[cypress-v2-readme]: /cypress-tests-v2/README.md
 
 ### Commits