Archive · 16 Sep 2026
Congress Calls New UPI Merchant Fees ‘Modi Tax’
The government has created a new fee for some large UPI payments made to businesses.
The fee is 0.4% when a merchant payment is more than Rs 2,000.
For payments of Rs 75,000 or more, the fee cannot be higher than Rs 300.
The change is expected to begin on October 15.
Payments between individuals and smaller payments are supposed to remain free.
The government says the fee is charged inside the merchant payment system, not directly to customers.
Congress says shopkeepers may raise prices to recover the cost, so ordinary people could still pay indirectly.
Congress also claims the policy was introduced because of pressure from American payment companies.
The government says the money will help banks and fintech companies improve payment infrastructure, innovation and security.
The government announced a 0.4% MDR on merchant UPI payments above Rs 2,000, capped at Rs 300 for payments of Rs 75,000 or more.
The framework is scheduled to take effect on October 15 and ends the zero-MDR regime introduced in January 2020.
Railways, telecom and fuel will face a flat Rs 5 fee per transaction, while capital-market payments will carry a 0.02% rate.
Congress leaders called the policy a “Modi Tax” and alleged it reflects pressure from American payment companies and the United States.
The government and BJP say customers will not be charged directly, person-to-person payments will remain free, and MDR will support banks and fintech investment.
- Who
- The Government of India, the Bharatiya Janata Party, and opposition leaders including Rahul Gandhi, Jairam Ramesh, Mallikarjun Kharge, Pawan Khera, Randeep Surjewala, Saugata Roy and Manoj Jha.
- What
- A new Merchant Discount Rate framework imposes a 0.4% charge on merchant UPI payments above Rs 2,000, with a cap and sector-specific rates.
- When
- The notification was issued around September 14-15, and the new framework is scheduled to take effect on October 15.
- Where
- India’s UPI merchant-payment system.
- Why
- The government says MDR will support investment in payment infrastructure, innovation and security; Congress says it could raise consumer prices and reflects US pressure.
Opposition’s allegations
Government and BJP’s response
Who ultimately pays
Opposition’s allegations
Congress and other opposition leaders argue that merchants will recover the MDR through higher prices, shifting the burden to consumers.
Government and BJP’s response
The government says MDR is charged within the merchant-payment ecosystem and customers will not be charged directly.
Future of free UPI
Opposition’s allegations
Congress says the policy ends the guarantee of universally free UPI payments and could allow charges to expand to other transactions, including person-to-person payments.
Government and BJP’s response
The government says everyday person-to-person payments, smaller payments and unlimited individual usage remain free, with no monthly quotas or volume restrictions.
US pressure
Opposition’s allegations
Rahul Gandhi, Jairam Ramesh and other opposition figures allege that American payment companies opposed India’s zero-MDR policy and that the new framework helps them compete with UPI.
Government and BJP’s response
The government’s stated reason is to help banks and fintech companies invest in infrastructure, innovation and security; the articles do not report a government confirmation of the pressure allegation.
Policy-making process
Opposition’s allegations
Congress describes the decision as a “FAST” move and a flip-flop because officials reportedly said in August that no MDR framework had been finalised before the September notification.
Government and BJP’s response
The government and BJP defend the announced framework and accuse Congress of spreading false information about consumer charges.
- Merchant UPI rate
- 0.4% on merchant transactions above Rs 2,000
- Maximum fee
- Rs 300 for transactions of Rs 75,000 or more
- Effective date
- October 15
- Sector-specific rates
- Railways, telecom and fuel face Rs 5 per transaction; capital markets face 0.02%
- Previous regime
- Zero MDR had been in place since January 2020
- Government position
- MDR applies to merchants, not directly to end users; person-to-person UPI payments remain free
- Congress position
- Merchants may pass the cost to consumers through higher prices
