Opposition slams 0.4% UPI MDR, Congress calls it ‘Modi tax’
The Opposition on Tuesday criticised the government over the introduction of a 0.4 per cent Merchant Discount Rate (MDR) on select UPI payments above Rs 2,000 made to merchants, with the Congress calling the move a “Modi tax”.
The new MDR framework, announced by the National Payments Corporation of India (NPCI), will come into effect from October 15 and apply to person-to-merchant (P2M) transactions above Rs 2,000. The charge will be capped at Rs 300 for transactions of Rs 75,000 and above.
Congress media and publicity department head and Rajya Sabha MP Pawan Khera alleged that the move could ultimately increase costs for consumers and discourage merchants from accepting digital payments.
“He popularised UPI, wanted all the credit for building a ‘cashless economy’ -- and now he is taxing people for using it,” Khera said in a post on X, referring to Prime Minister Narendra Modi.
Khera also alleged that although the charge would formally be imposed on merchants, they could seek to recover the additional cost from customers.
Leader of Opposition in the Lok Sabha Rahul Gandhi alleged that the government had “quietly cleared the way for UPI charges”, while Congress president Mallikarjun Kharge accused the government of extending its alleged “loot” to UPI.
“The government says no fees will be charged to customers. But where will the fees imposed on shopkeepers ultimately come from? Added to the prices, straight out of the customer’s pocket,” Kharge said.
The government has maintained that consumers will not be directly charged for UPI transactions. Person-to-person (P2P) transfers will remain free irrespective of the transaction amount, while P2M transactions of up to Rs 2,000 will also remain free.
Under the new framework, essential and thin-margin sectors, including railways, telecom, insurance, fuel and agricultural inputs, will face a flat MDR of Rs 5 per transaction above Rs 2,000.
These sectors account for nearly 17 per cent of P2M transaction volume but around 46 per cent of its transaction value, according to the government.
The government has also said that transactions of up to Rs 2,000 account for more than 95 per cent of P2M transaction volume and will remain unaffected.
P2P payments account for about 37 per cent of UPI transaction volume and 70 per cent of its transaction value and will continue to remain free.
MDR is a fee paid by merchants to banks and payment service providers for processing digital payments. The introduction of the charge marks a shift from the system under which UPI merchant transactions have largely remained free of MDR for nearly six years.