A 0.4 percent merchant discount rate (MDR) on transactions above ₹2,000 via UPI has become very controversial. Several business groups are requesting the government to scrap this plan. But the government has stated clearly that there is no change in decision. 

On Wednesday, tax experts said that merchants will also have to pay 18 percent GST on 0.4 percent MDR. But they will be able to avail themselves of the input tax credit. On Tuesday, NPCI fixed a cap on MDR for UPI transactions at ₹300. It will come into effect from October 15th.

Government sources stated that the MDR will not be rolled back. When asked if the government was considering rolling back the MDR, a senior Finance Ministry official said, "The decision has been taken and there is no question of reversing it." The official added, "The Parliamentary Standing Committee on Finance warned in its 32nd report that a zero MDR system puts pressure on the government treasury and limits the ability to invest in infrastructure. Therefore, it is essential to create a sustainable revenue system."

For businesses in certain categories, such as railways, telecom services, insurance, and fuel, a concessional MDR rate of just ₹5 will apply to payments exceeding ₹2,000. School fee payments exceeding ₹2,000 will also attract an MDR of just ₹5 per transaction.

The Centre's decision to impose MDR on UPI payments exceeding ₹2,000 has been challenged in the Supreme Court. Advocate Anjan Dutta filed the petition, arguing that the new system is arbitrary and discriminatory and will impose a financial burden on businesses in the country.

The All India Petroleum Dealers Association has launched a campaign against the MDR. The association has written to the Finance Minister, demanding that petrol pumps be exempted from this decision. This comes despite the fact that petrol pumps have already decided to charge only ₹5 per transaction for payments exceeding ₹2,000.

NITI Aayog Vice Chairman Ashok Kumar Lahiri defended the decision to levy the tax on UPI payments. Citing Chanakya, he said, "Tax should be collected from citizens like a bee collects honey from a flower—slowly and without damaging or breaking the petals."

The Finance Ministry said on Wednesday that there is no foreign influence behind the decision to impose a 0.4% MDR on UPI transactions. "Some claims have suggested that this change was due to foreign influence. This is false. India's policy decisions are made independently," the ministry said in a post on X.

A 0.4 percent merchant discount rate (MDR) on transactions above ₹2,000 via UPI has become very controversial. Several business groups are requesting the government to scrap this plan. But the government has stated clearly that there is no change in decision. 

On Wednesday, tax experts said that merchants will also have to pay 18 percent GST on 0.4 percent MDR. But they will be able to avail themselves of the input tax credit. On Tuesday, NPCI fixed a cap on MDR for UPI transactions at ₹300. It will come into effect from October 15th.

Government sources stated that the MDR will not be rolled back. When asked if the government was considering rolling back the MDR, a senior Finance Ministry official said, "The decision has been taken and there is no question of reversing it." The official added, "The Parliamentary Standing Committee on Finance warned in its 32nd report that a zero MDR system puts pressure on the government treasury and limits the ability to invest in infrastructure. Therefore, it is essential to create a sustainable revenue system."

For businesses in certain categories, such as railways, telecom services, insurance, and fuel, a concessional MDR rate of just ₹5 will apply to payments exceeding ₹2,000. School fee payments exceeding ₹2,000 will also attract an MDR of just ₹5 per transaction.

The Centre's decision to impose MDR on UPI payments exceeding ₹2,000 has been challenged in the Supreme Court. Advocate Anjan Dutta filed the petition, arguing that the new system is arbitrary and discriminatory and will impose a financial burden on businesses in the country.

The All India Petroleum Dealers Association has launched a campaign against the MDR. The association has written to the Finance Minister, demanding that petrol pumps be exempted from this decision. This comes despite the fact that petrol pumps have already decided to charge only ₹5 per transaction for payments exceeding ₹2,000.

NITI Aayog Vice Chairman Ashok Kumar Lahiri defended the decision to levy the tax on UPI payments. Citing Chanakya, he said, "Tax should be collected from citizens like a bee collects honey from a flower—slowly and without damaging or breaking the petals."

The Finance Ministry said on Wednesday that there is no foreign influence behind the decision to impose a 0.4% MDR on UPI transactions. "Some claims have suggested that this change was due to foreign influence. This is false. India's policy decisions are made independently," the ministry said in a post on X.