UPI Charges Decision Will Not be Rolled Back, Government Says
The government has rejected a request for a rollback of the new UPI Merchant Discount Rate (MDR) structure for some transactions exceeding INR 2,000, stating that the decision was taken after comprehensive deliberations. Consumer-to-consumer UPI payments will remain free.
Highly placed sources have stated that the decision to tax some UPI transactions over INR 2,000 was deliberated and made five years ago. In spite of the opposition's harsh criticism, they underlined, the measure will not be reversed. On September 15th, the National Payments Corporation of India (NPCI) made an announcement regarding the Merchant Discount Rate (MDR) for some UPI payments above INR 2,000.
However, all consumer transactions would still remain free of charge. For purchases between consumers and businesses above INR 2,000 (equivalent to about INR 8 for a sum of INR 2,001), a charge of 0.4% will be applied. Railways, telecommunications, insurance, and petrol are some of the other industries that will have a fixed tariff of INR 5.
Clarification from Ministry of Finance Over UPI Charges
Transactions between individuals will remain free. In addition, there would be zero transaction fees for small merchants who receive up to INR 1 lakh monthly through UPI QR codes. In a statement, the Ministry of Finance made it clear that MDR is not a tax or levy that the government or NPCI collects. In order to keep the UPI ecosystem running and growing, it is shared among financial institutions and companies that offer payment apps.
After extensive discussions, the UPI Steering Committee introduced the framework under the Payment and Settlement Systems Act, 2007. The goal of the framework is to safeguard small merchants and individuals from excessive charges while ensuring the long-term sustainability of UPI. Only 4% of transactions will be subject to the fee, according to media sources. Nobody in particular will feel the effects of this decision, and it will not be reevaluated. The Congress and other opposition parties were quick to criticise the NPCI's declaration, describing the MDR as "anti-people".
Petrol Pump Dealers May Stop UPI Payments
Many petrol station vendors in India have threatened to ward off customers who pay INR 2,000 or more using UPI. Also, they mentioned that if a flat MDR of INR 5 is required for each transaction, they will switch to paying with cash. Their already razor-thin profit margins would be even more constrained by the levy, they said. The media house spoke with dealers from the following states: Delhi NCR, Punjab, Uttar Pradesh, Mumbai, Karnataka, and Rajasthan.
They all agreed that MDR, in whatever shape it takes, is a further drain on their already razor-thin profit margins, which range from about INR 2.40 to 3.40 per litre—margins that are also set by the government via its oil marketing companies (OMCs). The India Petroleum Traders Federation (FAIPT) spokesperson Monty Sehgal said that in the event that fuel retailers are not granted an exemption, the merchants may cease taking UPI payments of INR 2,000 and more.
