UPI MDR not tax, cess or surcharge; won’t burden consumers: FM

The proposed Merchant Discount Rate (MDR) on select high-value UPI transactions is neither a tax, cess nor a surcharge, and the collections will not accrue to the government, Finance Minister Nirmala Sitharaman said, rejecting criticism from Opposition parties. The Finance Minister said the MDR is a charge within the digital payments ecosystem and is being levied by entities facilitating UPI transactions, including payment service providers, merchant's bank and other ecosystem participants. Talking to new sgency in New Delhi.Sitharaman said the charge was intended to support the technology infrastructure, innovation and other costs involved in running the digital payments ecosystem. Sitharaman also noted that merchants already pay MDR on credit and debit card transactions and said the new UPI framework should not be seen as a charge on customers.
The National Payments Corporation of India (NPCI) has fixed the MDR at 0.4 per cent for eligible UPI merchant transactions above Rs 2,000, with the charge capped at Rs 300 for transactions of Rs 75,000 or more. Person-to-person payments will continue to remain free.Certain essential services, including railways, telecom, fuel and insurance, will attract a flat Rs 5 fee for transactions above Rs 2,000, while capital market transactions such as mutual funds and stockbroking will attract an MDR of 0.02 per cent, capped at Rs 300.
Small merchants receiving up to Rs 1 lakh a month through UPI QR payments will remain exempt from the new MDR. Around 96 per cent of merchant transactions are estimated to remain unaffected by the framework. The NPCI introduced the new MDR framework to create a sustainable revenue model for the digital payments ecosystem. A dedicated fund for promoting UPI adoption among small merchants will also be created, with 5 per cent of total MDR collections earmarked for it