Overview
- The National Payments Corporation of India announced a Merchant Discount Rate of 0.4% on person‑to‑merchant UPI transactions above Rs 2,000, capped at Rs 300 and with a concessional flat Rs 5 for some low‑margin sectors, to take effect on Oct 15.
- The Finance Ministry and NPCI have repeatedly said the levy is a settlement fee between service providers, not a government tax, that person‑to‑person transfers and transactions up to Rs 2,000 remain free, and eligible merchants can claim input tax credit on the GST that applies to the MDR service fee.
- Retail and trade bodies have intensified pushback, with traders in Madhya Pradesh holding a ‘No UPI Day’ on Sept 23 and petrol pump associations saying they will refuse UPI payments above Rs 2,000 after the fee starts, citing thin margins and lost revenue.
- Merchants and developers are testing avoidance tactics such as splitting bills into sub‑Rs 2,000 transactions and payment‑splitting apps, raising questions about how the rule will be enforced and whether acceptance will fall for higher‑value purchases.
- UPI’s scale frames the debate: officials note more than 96% of P2M UPI transactions by count fall under Rs 2,000 and merchants with monthly UPI receipts up to Rs 1 lakh are exempt, but critics warn the change could push some volume back to cash and complicate GST treatment for exempt or non‑registered sellers.