GUWAHATI: The Supreme Court on Monday, September 28, refused to stay the Centre’s decision to impose a Merchant Discount Rate (MDR) of 0.4% on specified UPI person-to-merchant (P2M) transactions above ₹2,000.
ALSO READ: Gauhati University GS Post Election Put On Hold, No Candidate Declared Winner
A three-judge Bench headed by Chief Justice of India Surya Kant issued notices to the Centre, the Reserve Bank of India (RBI) and the National Payments Corporation of India (NPCI) on a petition challenging the MDR charges.
The petition argued that the new charges could encourage merchants to refuse UPI payments, split transactions or factor the additional cost into prices. It also raised concerns that the move could push transactions back towards cash.
Appearing for the Centre, Additional Solicitor General N Venkataraman said the charges would come into effect from October 15. He told the court that around 96% of transactions would not face the charge and that MDR for essential services would be capped at ₹5.
The Centre also clarified that the MDR is neither a tax nor a fee.
During the hearing, Justice Joymalya Bagchi questioned the legal basis for imposing the charge and asked whether it was a tax or a fee. Chief Justice Surya Kant said the court would require the government to provide the relevant facts through an affidavit.
Under the announced framework, the 0.4% MDR will apply to specified P2M UPI transactions above ₹2,000, with a maximum charge of ₹300 for transactions of ₹75,000 or more.
Certain essential and thin-margin sectors, including railways, telecommunications, insurance, fuel and agricultural inputs, will attract a flat MDR of ₹5 for transactions above ₹2,000. Capital market transactions will attract a lower MDR of 0.02%, capped at ₹300.
The government has said that around 96% of merchant transactions will remain unaffected. Small merchants receiving up to ₹1 lakh per month through UPI QR codes under the P2PM category will continue to receive zero MDR.
The Finance Ministry has also advised banks to ensure that merchants do not pass the MDR on to consumers. UPI application providers have been prohibited from imposing platform fees or hidden charges on users under the framework.
