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Charges on UPI transactions above ?2,000: Who profits? Supreme Court poses tough questions to the government
New Delhi, September 28, 2026: On Monday, the Supreme Court refused to grant an immediate stay on the Central Government's decision to levy a Merchant Discount Rate (MDR) on certain UPI 'Person-to-Merchant' (P2M) transactions exceeding ?2,000, effective October 15. However, the Court directed the Central Government, the Reserve Bank of India (RBI), and the National Payments Corporation of India (NPCI) to submit detailed affidavits regarding the legal basis for this charge.
A bench led by Chief Justice Surya Kant (along with Justice Joymalya Bagchi and Justice V. Mohana) posed searching questions to the government while hearing the petition. The Court asked, "Is this a tax or a fee? If it is not a fee, what is the executive basis for levying this charge? What is the service being provided?" It also raised questions regarding who would earn revenue from this charge and how the funds would be distributed.
Additional Solicitor General N. Venkataraman clarified that the charge is neither a tax nor a fee; rather, it is a settlement fee between banks and payment service providers, facilitated by the NPCI. The government would not receive a single rupee from this. He stated that 96 percent of UPI transactions would remain exempt from this charge, and the maximum fee for essential services is capped at ?5.
Petitioner Advocate Anjan Datta has challenged the Central Government's notifications dated September 14 and 15. Although he sought a stay on the implementation of the charge, the Court rejected the request. The Court directed the concerned parties to file affidavits within four weeks, noting that the matter involved technical aspects. Under the new MDR framework:
An MDR of 0.4% will be charged on specific P2M UPI transactions exceeding ?2,000.
The maximum charge for transactions of ?75,000 or more is capped at ?300.
A flat fee of ?5 applies to essential services such as railways, telecom, insurance, fuel, and agricultural inputs.
Person-to-Person (P2P) transactions will remain completely free.
Zero MDR will continue to apply to small merchants (with a monthly turnover of up to ?1 lakh).
The government has stated that instructions have been issued to banks directing merchants not to pass this charge on to customers. The government maintains that this arrangement is necessary to sustain the digital payment ecosystem. The Supreme Court has directed that the next hearing on this matter will take place after the submission of affidavits.
New Delhi, September 28, 2026: On Monday, the Supreme Court refused to grant an immediate stay on the Central Government's decision to levy a Merchant Discount Rate (MDR) on certain UPI 'Person-to-Merchant' (P2M) transactions exceeding ?2,000, effective October 15. However, the Court directed the Central Government, the Reserve Bank of India (RBI), and the National Payments Corporation of India (NPCI) to submit detailed affidavits regarding the legal basis for this charge.
A bench led by Chief Justice Surya Kant (along with Justice Joymalya Bagchi and Justice V. Mohana) posed searching questions to the government while hearing the petition. The Court asked, "Is this a tax or a fee? If it is not a fee, what is the executive basis for levying this charge? What is the service being provided?" It also raised questions regarding who would earn revenue from this charge and how the funds would be distributed.
Additional Solicitor General N. Venkataraman clarified that the charge is neither a tax nor a fee; rather, it is a settlement fee between banks and payment service providers, facilitated by the NPCI. The government would not receive a single rupee from this. He stated that 96 percent of UPI transactions would remain exempt from this charge, and the maximum fee for essential services is capped at ?5.
Petitioner Advocate Anjan Datta has challenged the Central Government's notifications dated September 14 and 15. Although he sought a stay on the implementation of the charge, the Court rejected the request. The Court directed the concerned parties to file affidavits within four weeks, noting that the matter involved technical aspects. Under the new MDR framework:
An MDR of 0.4% will be charged on specific P2M UPI transactions exceeding ?2,000.
The maximum charge for transactions of ?75,000 or more is capped at ?300.
A flat fee of ?5 applies to essential services such as railways, telecom, insurance, fuel, and agricultural inputs.
Person-to-Person (P2P) transactions will remain completely free.
Zero MDR will continue to apply to small merchants (with a monthly turnover of up to ?1 lakh).
The government has stated that instructions have been issued to banks directing merchants not to pass this charge on to customers. The government maintains that this arrangement is necessary to sustain the digital payment ecosystem. The Supreme Court has directed that the next hearing on this matter will take place after the submission of affidavits.
A bench led by Chief Justice Surya Kant (along with Justice Joymalya Bagchi and Justice V. Mohana) posed searching questions to the government while hearing the petition. The Court asked, "Is this a tax or a fee? If it is not a fee, what is the executive basis for levying this charge? What is the service being provided?" It also raised questions regarding who would earn revenue from this charge and how the funds would be distributed.
Additional Solicitor General N. Venkataraman clarified that the charge is neither a tax nor a fee; rather, it is a settlement fee between banks and payment service providers, facilitated by the NPCI. The government would not receive a single rupee from this. He stated that 96 percent of UPI transactions would remain exempt from this charge, and the maximum fee for essential services is capped at ?5.
Petitioner Advocate Anjan Datta has challenged the Central Government's notifications dated September 14 and 15. Although he sought a stay on the implementation of the charge, the Court rejected the request. The Court directed the concerned parties to file affidavits within four weeks, noting that the matter involved technical aspects. Under the new MDR framework:
An MDR of 0.4% will be charged on specific P2M UPI transactions exceeding ?2,000.
The maximum charge for transactions of ?75,000 or more is capped at ?300.
A flat fee of ?5 applies to essential services such as railways, telecom, insurance, fuel, and agricultural inputs.
Person-to-Person (P2P) transactions will remain completely free.
Zero MDR will continue to apply to small merchants (with a monthly turnover of up to ?1 lakh).
The government has stated that instructions have been issued to banks directing merchants not to pass this charge on to customers. The government maintains that this arrangement is necessary to sustain the digital payment ecosystem. The Supreme Court has directed that the next hearing on this matter will take place after the submission of affidavits.
