Punjab Newsline | New Delhi
Supreme Court on Monday declined to grant an interim stay on the Centre’s decision to impose a 0.4% charge on certain UPI merchant transactions, scheduled to come into effect from October 15. However, the court issued a notice to the Central Government and sought an explanation on the basis for introducing the new rule.
A three-judge bench comprising Chief Justice Surya Kant, Justice Joymalya Bagchi and Justice V. Mohan heard a Public Interest Litigation (PIL) filed by advocate Anjan Dutta challenging the decision.
In his petition, Dutta questioned the rationale behind fixing the threshold at ₹2,000 and sought clarity on why different rules were being applied to UPI and RuPay transactions. The PIL also called for the withdrawal of the proposed charge.
The petition argued that the government introduced the fee without adequate public consultation or a clearly defined regulatory framework. It also challenged Section 10A of the Payment and Settlement Systems Act, 2007, alleging that it gives the government excessive discretion to decide which digital payment modes remain free and which attract charges.
Appearing for the Centre, Additional Solicitor General N. Venkataraman told the court that person-to-person UPI transfers would continue to remain free. He added that nearly 96% of small retail transactions across the country would not be affected by the new fee structure.
Under the new framework, merchants whose monthly UPI collections exceed ₹1 lakh will be required to pay a 0.4% Merchant Discount Rate (MDR), along with applicable GST, on individual UPI transactions above ₹2,000.
Small merchants with monthly UPI collections of up to ₹1 lakh will continue to enjoy free UPI transactions, regardless of the payment amount. However, if a merchant records UPI collections exceeding ₹1 lakh for three consecutive months, banks may reclassify the business as a larger merchant, making it liable for the charge.
The government has also clarified that no MDR will be levied on transactions of ₹2,000 or less, even for large merchants. Additionally, the maximum charge on transactions of ₹75,000 or more has been capped at ₹300 plus GST.
Officials further clarified that the ₹2,000 threshold will apply to each individual transaction rather than the total value of a merchant’s daily sales.
Merchant Discount Rate (MDR) is a fee paid by merchants to banks and payment service providers for facilitating digital payments through UPI, cards and other electronic payment systems. The charge is intended to cover the operational costs of maintaining payment infrastructure and processing transactions. Importantly, the fee is borne by merchants and not by customers making payments.
