Opposition MPs Attack 0.4% UPI Fee on Merchant Payments Above ₹2,000

Q: Is this new merchant charge just the first step toward taxing everyday users for UPI transactions?

No—based on the policy announced so far, this is not a direct charge on everyday UPI users. The new levy is a merchant discount rate, or MDR, applied only to certain person-to-merchant payments above ₹2,000, and the government, NPCI and the RBI have all said consumer-facing UPI use will remain free. That means person-to-person transfers, self-transfers, and merchant payments up to ₹2,000 are still free. Small merchants receiving up to ₹1 lakh a month via UPI QR codes are also exempt. In practice, officials say roughly 95% to 96% of UPI merchant transactions will not be affected. UPI apps are also not allowed to add separate platform fees, and banks have been told merchants should not pass MDR on to customers. The real change is on the back end of the system. Banks, payment firms and NPCI argue the zero-fee model has become hard to sustain at UPI’s current scale, with annual operating costs estimated around ₹20,000 crore. The new MDR is meant to fund infrastructure, fraud prevention, cybersecurity and merchant expansion. The concern raised by opposition MPs is less about an immediate fee on users than about the possibility that this could open the door to broader charges later or lead some merchants to indirectly recover costs through pricing. That risk cannot be ruled out over time, because policy can change. But there is no announced move right now to tax or directly charge ordinary users for routine UPI payments.

3 articles · Updated · The Hindu · Sep 16

Opposition lawmakers on Sept. 16 challenged the government's new 0.4% fee on UPI merchant payments above ₹2,000, calling it anti-people and saying it would affect the wider population.
The criticism followed Tuesday's decision to end nearly six years of fully free UPI payments by imposing the charge from Oct. 15 on higher-value merchant transactions.
Finance Ministry said customers will not pay the fee directly, describing MDR as a charge within the merchant payment ecosystem while keeping person-to-person transfers and small payments free.
Bhartruhari Mahtab, who chairs Parliament's finance panel, said members raised the issue in committee and it could be taken up again at the panel's next meeting.

Sources

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Right50%

The Hindu3h ago

Opposition MPs Criticize 0.4% UPI Merchant Payment Fee Over ₹2,000

National Herald15h ago

Govt introduces 0.4% tax on UPI merchant payments above Rs 2,000

dailymotion.com3h ago

Political Row Erupts Over New UPI Rule as Opposition and Centre Clash Over MDR Charges

4 Sources

Is this new merchant charge just the first step toward taxing everyday users for UPI transactions?

Could ending the zero-fee model backfire and force shopkeepers to abandon digital payments altogether?

India’s New UPI MDR Policy: What the 0.4% Fee Means for Merchants, Consumers, and the Future of Digital Payments

Overview

India’s UPI will introduce a 0.4% Merchant Discount Rate (MDR) on select transactions above Rs 2,000 from October 15, 2026, ending the unsustainable zero-fee model driven by massive transaction volumes and high operational costs. This move aims to create a self-sustaining payment ecosystem and address international trade tensions, especially with the U.S., which criticized India’s earlier zero-MDR policy. While some merchants may try to bypass the new fees, the government and payment networks will use data analytics and consumer grievance portals to enforce compliance. A portion of MDR collections will fund digital payment expansion in rural areas, ensuring continued financial inclusion.

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