&imwidth=800&imheight=600&format=webp&quality=medium "SC refuses to stay fee on UPI transactions, seeks explanation from Centre")
The supreme court on Monday (Sept 28) refused to stay the Centre’s decision to impose Merchant Discount Rate (MDR) on specified Unified Payments Interface (UPI) person-to-merchant transactions above Rs 2,000, to be implemented from October 15. However, an affidavit from the Union government was sought by the court asking to explain the basis and legal framework for the new charges.
A bench comprising Chief Justice Surya Kant and Justices Joymalya Bagchi and V Mohana while hearing a PIL filed by advocate Anjan Datta challenging the Centre’s notifications to impose Merchant Discount Rate observed that the issue is less legal and more technical.
The bench also questioned the legal basis for imposing the charge and sought to know whether the levy was a tax or a fee and what was the executive basis for imposing it.
The National Payments Corporation of India (NPCI) had on September 16 announced that a fee of 0.4 per cent will be charged on Unified Payments Interface (UPI) transactions to certain merchants when the transaction value exceeds ₹2,000. It also clarified that customers will not have to pay any fee for making UPI payments under the revised system. As per the new rules, Person-to-Merchant (P2M) UPI payments above ₹2,000 will attract a 0.4 per cent Merchant Discount Rate (MDR). However, the charge will not exceed ₹300 for a single transaction. The new MDR structure will be effective from October 15, 2026.
What is MDR?
MDR refers to the fee charged to merchants by banks and payment service providers for processing digital payments. The amount depends on factors such as the payment method, the type of merchant, the transaction value, and the agreement between the businesses involved. In a digital payment system, a customer pays a merchant electronically, while the merchant pays a small fee to the company or bank that processes the transaction. Although merchants are generally expected to bear this cost, some businesses may add the charge to the customer's bill.
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