Customers should not bear merchant payment charges, government sources told news agency ANI. Officials will closely monitor implementation to ensure businesses do not pass these costs on.
The government has already discussed the issue with payment aggregators, ANI added. Efforts will also be made to address gaps in enforcement.
On taxation, government sources said, “There is no separate GST on MDR.” However, they clarified that GST would apply to MDR charges on UPI payments. Businesses can claim input tax credit against the GST paid.
“GST will currently be levied on MDR charges applicable to UPI transactions. However, businesses will be able to claim input tax credit against the GST paid. Businesses have the option to set off the GST liability,” the source added.
New UPI rules
According to the Finance Ministry, personal money transfers remain free, whatever the amount. Customers paying businesses will not bear the merchant discount rate (MDR).
A 0.4% MDR will apply to specified merchant payments above ₹2,000, capped at ₹300. Payments of ₹2,000 or less, along with eligible small merchants, remain exempt.
Selected essential sectors will attract a fixed ₹5 fee for payments above ₹2,000. The ministry says roughly 96% of merchant transactions will see no change.
Reactions
Traders fear higher business costs while customers worry that shops could increase prices due to the new UPI rule. Some trader groups have discussed encouraging cash payments to avoid fees on larger purchases.
Opposition parties have called the changes “anti-people” and harmful to savings. Congress has called it a “Modi Tax” on common people. Rahul Gandhi has argued that, while large commercial transactions account for just 5% of overall UPI volume, they account for roughly 65% of UPI’s total transaction value.
A Supreme Court petition has also challenged the notification introducing the charges.
The government, however, has defended the move and ruled out withdrawing it. Officials say the fees will help maintain the digital payments network after six years.
Smaller vendors receiving less than ₹1 lakh per month via QR codes remain exempt. Larger businesses worry about pressure on their profits and rising operating expenses.
The government says ordinary customers and 96% of merchant transactions remain unaffected. Despite these assurances, concerns persist about businesses indirectly passing costs on to buyers.
