UPI MDR Not a Tax, Cess or Surcharge and Will Not Burden Consumers: FM

Finance Minister Nirmala Sitharaman stated that the planned Merchant Discount Rate (MDR) on certain high value UPI transactions is not a tax, cess or surcharge and that the collections will not go to the government, rejecting criticism from opposition parties.

The Finance Minister stated that the MDR is a fee that is imposed by entities that facilitate UPI transactions, such as payment service providers, merchant banks and other ecosystem members and that it is a charge that is part of the digital payments ecosystem. The FM informed PTI that this is not a tax, a cess or even surcharge. The collection is not going into the Consolidated Fund of India.

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Under the new structure, a 0.4 percent MDR is charged on certain UPI transactions over Rs.2,000 between people and businesses. The finance ministry has stated that clients cannot be charged the MDR and that banks have been warned to ensure that merchants do not transfer the cost to customers. The fee will be borne by the businessperson and remain inside the payment ecosystem, according to Sitharaman, who spoke to PTI.

“The merchant is the one who is going to pay. That money is not coming to the Government of India and we are not imposing it. And this will not be passed on to the customer”, FM said. PTI reports that the revised merchant charge will become effective on October 15.