1 hr ago
Congress Calls New UPI Merchant Charges ‘Modi Tax’
The government has created a new fee for some large UPI payments made to businesses.
The fee is 0.4% when the payment is more than Rs 2,000.
For payments of Rs 75,000 or more, the fee cannot be higher than Rs 300.
The government says customers will not be charged directly.
It says the money will help banks and fintech companies improve payment systems and security.
Congress disagrees and says shopkeepers may raise prices to recover the fee.
Congress has called the policy a “Modi Tax” and accused the government of giving in to pressure from American payment companies.
The two sides also disagree about whether the change breaks the promise of free UPI payments.
The government introduced a 0.4% MDR on merchant UPI transactions above Rs 2,000.
The fee is capped at Rs 300 for transactions of Rs 75,000 or more.
Railways, telecom and fuel face a flat Rs 5 fee, while capital markets face 0.02%.
Congress called the policy a “Modi Tax” and alleged it resulted from American pressure.
The government says MDR applies only to merchants and will support banking and fintech investment.
- Who
- The Government of India and Congress leaders, including Rahul Gandhi, Jairam Ramesh, Pawan Khera and Mallikarjun Kharge.
- What
- A new Merchant Discount Rate framework allows a 0.4% charge on merchant UPI transactions above Rs 2,000, subject to specified caps and sector-specific rates.
- Where
- India’s digital payments system, including merchant UPI transactions.
- When
- The notification was issued on Tuesday, following government statements on August 6 and August 10 that no MDR framework had been finalised.
- Why
- The government says the MDR will support banks and fintech companies’ infrastructure, innovation and security; Congress says it could burden consumers and reflects American pressure.
Congress’s criticism
Government’s rationale
Who bears the cost
Congress’s criticism
Congress argues that merchants will recover the MDR through higher prices, meaning consumers will ultimately pay.
Government’s rationale
The government says the MDR applies only to merchants and not directly to end users or customers.
Effect on free UPI
Congress’s criticism
Congress says the change abandons the zero-fee promise, removes a statutory guarantee and could allow charges to expand later to other transactions.
Government’s rationale
The government has introduced a framework focused on large merchant payments and says the revenue will help strengthen the payment ecosystem.
American pressure
Congress’s criticism
Rahul Gandhi and Jairam Ramesh allege that American payment companies opposed India’s zero-MDR policy and that the new framework reflects pressure from the United States.
Government’s rationale
The government’s stated justification is supporting banks and fintech companies’ investment in infrastructure, innovation and security; the articles do not report a government confirmation of the pressure allegation.
Key facts
- Merchant UPI rate
- 0.4% on transactions above Rs 2,000
- Maximum fee
- Rs 300 for transactions of Rs 75,000 or more
- Essential sectors
- Railways, telecom and fuel face a flat Rs 5 fee per transaction
- Capital markets
- A 0.02% rate applies
- Previous regime
- Zero MDR had been in place since January 2020
- Government position
- MDR applies to merchants, not end users, and will support investment in infrastructure, innovation and security
- Congress position
- The fee could be passed on to consumers through higher prices
Quotes
Nirmala Sitharaman
Union Finance Minister
“Before spreading a canard, @Jairam_Ramesh ji, please consider this: Merchant Discount Rate (MDR) applies only to merchants and not to the end users/customers. It will support the Banks & Fintech to invest more in infrastructure, innovation & security. All users of UPI will reap the benefits of this investment.”
rediff.com
“He popularised UPI, wanted all the credit for building a 'cashless economy' -- and now he is taxing people for using it.”
rediff.com
theprint.in
Sources
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