UPI MDR: PCI fact-checks Kerala Congress ₹146 on diesel payment of ₹30,924, claims charge is ₹5 | Today’s news
The Payments Council of India (PCI) on Thursday disputed the Kerala Congress’s claim that UPI’s 0.4% merchant discount rate (MDR) on fuel payments could significantly reduce fuel station operators’ margins and increase transport costs, saying the calculation does not apply to fuel transactions.
The Kerala Congress claimed that a truck filled with 300 liters of diesel would require payment ₹30,924 and that 0.4% MDR would cost the pump owner approx ₹146. It stated that this will reduce the operator’s gross commission by 18.66%.
The party said: “He absorbs the hit, or passes it on to the customer, or asks for cash. Why would a truck driver pay extra when cash costs nothing?”
Quick answers to key questions
•5 QUESTIONS
A flat merchant discount rate (MDR) of ₹5 will be applied to UPI fuel transactions above ₹2,000 instead of a percentage charge.
The Kerala Congress argued that the 0.4% MDR on the heavy diesel payment would significantly reduce the margins of petrol pump operators, which could lead to higher costs for consumers.
Small merchants withdrawing up to ₹100,000 per month through UPI will remain exempt from the new MDR charges, protecting them from additional costs.
The government does not expect a significant increase in cash transactions as the new MDR will affect only a small percentage of total UPI transactions.
The Ministry of Finance is introducing a monitoring framework to ensure that payment service providers do not pass on MDR costs to customers.
He further said that the higher costs could eventually affect the customers of the shipping companies, especially the businesses operating on low margins.
PCI says that MDR fuel is limited to ₹5
In response to PCI’s claims, it said that ₹146 the calculation was based on the incorrect application of the MDR rate to fuel transactions.
“With due respect, we wish to submit a factual clarification: The ₹146 does not reflect the fuel-specific provisions of the MDR,” PCI said.
Referring to the NPCI FAQ, the PCI stated the above fuel and oil transactions ₹2,000 attracts a flat MDR of Rs ₹5, while the transaction below ₹2,000 have zero MDR.
Read also | UPI Payments: GST is applicable on MDR but customers should not bear the cost
According to this provision, PCI stated that the MDR on a ₹30,924 purchase of fuel would be ₹5, or ₹5.90 inclusive of 18% GST if GST is applicable, no ₹146.
What does the NPCI FAQ say?
The clarification refers to Q33 in the NPCI FAQ, which asks which categories of traders are eligible for a flat MDR instead of a percentage-based rate.
The response lists categories including railways, telecom services, insurance and fuel, among others, and states that the lump sum of MDR ₹5 per transaction applies to the above transactions ₹2000.
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This means that the fuel transaction cited by the Kerala Congress would not attract 0.4% MDR calculated as a whole ₹30,924 payment under the provisions of the cited PCI.
PCI concluded its response by saying, “We hope this clarification will help keep the discussion factually accurate and constructive.”
The issue centered on the difference between the percentage-based MDR and the sector-specific flat MDR applicable to fuel transactions, with the PCI saying the latter should be used in calculating the cost of the diesel payment described by the Kerala Congress.
Cash transactions are unlikely to increase after the 0.4% levy on the above payments ₹2000: Message
The Finance Ministry does not foresee a significant shift towards cash payments after the 0.4% MDR is introduced on the above UPI transactions ₹2,000 from October 15, according to PTI citing sources.
Officials expect the new fee to have limited impact on UPI usage as transactions exceed ₹The 2,000 threshold represents only about 4% of the total UPI transaction volume, sources said.
According to its sources, consumer fears of switching to cash are also unlikely to materialize as RuPay debit card transactions will remain completely free regardless of transaction amount.
The government is reportedly planning checks to protect consumers
The finance ministry is working on a monitoring framework to ensure that payment service providers do not pass on MDR costs to customers, PTI said citing sources. The ministry has already started discussions with payment aggregators and other participants in the UPI ecosystem to make them aware of the new MDR and discourage any attempt to pass on the fee to users.
Read also | Sebi to consider brokers’ MDR concerns as UPI costs emerge
The government also does not expect the new levy to significantly raise the prices of goods and services. They said the measure was unlikely to have an inflationary impact.
The impact of GST is expected to remain limited, the report said
Sources said the GST levied on MDR is expected to be neutralized to a large extent through input tax credit, which will limit its impact on overall transaction costs.
The ministry has put different types of transactions into specialized categories and does not expect GST to create a significant additional burden on MDR, sources said.
However, if there are any outstanding GST issues on MDR, they may be brought up to the GST Council for consideration in its upcoming meeting, they added.
