India
oi-Madhuri Adnal
The Supreme Court on Monday sought the Centre’s response to a petition challenging the decision to introduce a Merchant Discount Rate (MDR) on UPI payments made to merchants for transactions above ₹2,000.
The matter came up before a bench headed by Chief Justice of India Surya Kant, which was hearing a public interest litigation (PIL) filed by advocate Anjan Datta. The court said the issue was largely technical rather than legal and asked the Centre to explain the facts in a short affidavit.
The Supreme Court asked the Centre to explain the legal basis via affidavit for imposing a 0.4% MDR on UPI payments over ₹2,000 to merchants from October 15, clarifying it’s a settlement fee facilitated by NPCI, not government income.
The petition, filed and argued by Datta along with advocate Ashutosh Dubey, challenges the September 14 notification issued by the Ministry of Finance. The new system is scheduled to take effect from October 15.
Under the proposed framework, a 0.4 per cent MDR will apply to UPI payments above ₹2,000 made to merchants. The charge will be capped at ₹300 for transactions of ₹75,000 and above.
The Centre has said the move will not affect person to person UPI transfers. Such transfers will continue to remain free, irrespective of the amount involved.
Appearing for the Centre, Additional Solicitor General N Venkataraman told the court that the new charges had not yet come into effect. He said 96 per cent of people using the UPI payment gateway would be outside the scope of the new charge, while essential services among the remaining transactions would also have a cap.
Supreme Court questions how MDR can be imposed
The bench, which also included Justices Joymalya Bagchi and V Mohana, wanted the Centre to explain the legal basis for introducing the charge.
The judges questioned the executive power to impose such a payment and asked what exactly the proposed MDR should be considered if it was not a fee. The court also pointed out that a fee could not simply be imposed through an executive order.
Venkataraman told the court that the money would not go to the government.
“Not one rupee from this will go to the government,” he said, explaining that the amount would be treated as a settlement fee between the bank and the service provider, with the National Payments Corporation of India (NPCI) facilitating the settlement.
The court said the Centre’s response would help it understand the nature of the payment and determine in whose hands it could be treated as “income”.
