Supreme Court refuses to stay charges on UPI payments above Rs 2,000 , questions legal basis of MDR
PTC News Desk: The Supreme Court on Monday refused to stay the new Merchant Discount Rate (MDR) framework for specified UPI transactions above Rs 2,000. However, the court has sought responses from the Centre, the Reserve Bank of India (RBI) and the National Payments Corporation of India (NPCI) on a plea challenging the new system.
The case has raised an important question about how India’s UPI payment system will work: if the government is not collecting the money, what is the legal basis for the charge?
Supreme Court examines legal basis of UPI charge
A three-judge Supreme Court bench, headed by Chief Justice of India Surya Kant and comprising Justices Joymalya Bagchi and V Mohana, heard a petition filed by advocate Anjan Datta.
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During the hearing, the court sought clarification about the nature of the charge. Additional Solicitor General N Venkataraman, representing the Centre, said the Merchant Discount Rate (MDR) is neither a tax nor a government fee.
The new system does not mean that every UPI payment above ₹2,000 will attract a charge for the customer. The MDR applies only to certain person-to-merchant (P2M) transactions above ₹2,000.
For eligible transactions, the standard MDR is 0.4%, with a maximum charge of ₹300 for transactions of ₹75,000 or more. For example, a ₹10,000 eligible transaction would attract an MDR of ₹40.
However, this charge applies within the merchant payment system. The government has clarified that customers should not be asked to pay the MDR separately.
The Finance Ministry has also said UPI apps cannot add platform fees or hidden charges to users because of the new framework.
UPI payments up to ₹2,000 remain free
UPI transfers between individuals will continue to be free, regardless of the amount.
Payments to merchants of up to ₹2,000 will also remain outside the MDR system.
The government has further said that small merchants receiving up to ₹1 lakh per month through UPI QR codes under the specified category will continue to get zero MDR.
According to the government, around 96% of UPI merchant transactions will remain unaffected.
So, if someone pays ₹1,500 to a shopkeeper through UPI, they will not have to pay an additional MDR simply because of the new framework.
- PTC NEWS
