SC questions legal basis for new UPI fees, rejects plea to maintain fee | Today’s news
Mumbai: The Supreme Court on Monday refused to set aside the Centre’s decision to levy fees on select UPI transactions above ₹2,000 but has asked the government for an affidavit explaining the basis for introducing the new business discount rate (MDR).
The Supreme Court also issued notices to the Reserve Bank of India (RBI), the payments regulator, and the National Payments Corporation of India (NPCI), which operates the Unified Payments Interface (UPI) network.
The court was hearing a plea filed by advocate Anjan Datta challenging the legal basis of the tax and the manner in which it was imposed. A bench headed by Chief Justice Surya Kant along with Justices Joymalya Bagchi and JV Mohana questioned the Center on the legal nature of the charge and the authority under which it could be imposed.
The bench questioned the government’s explanation that MDR is neither a tax nor a fee.
“What is the executive scope of this expropriation? We would understand if it was a fee. It is not a fee, so what is the character?” asked the bench.
The government announced on September 15 that an MDR of 0.4% will be levied on merchant-to-merchant (P2M) UPI payments. ₹2,000 or more, with an upper limit ₹300 on transactions ₹75,000 or more. However, UPI (P2P) person-to-person payments will remain free. The new levies will come into effect on October 15.
Read also | UPI MDR pinches retailers with bigger baskets, saves others
Additional Solicitor General N. Venkataraman, appearing for the Centre, said the government was not collecting the money. Instead, it was a settlement fee paid between participants in the payment system.
“There is a cost to transact with debit/credit cards. UPI is no different: There are two operators providing the service. One is the banks. It is not a statutory selection of the Indian government. It is a settlement fee between players facilitated by NPCI. The government does not charge a rupee,” Venkataraman said, explaining that banks and payment operators that would be shared under the proposed UDR and payment transaction system costs, costs for processing UDR transactions and payments will be incurred. government.
During Monday’s hearing, the petitioner’s counsel also argued that UPI helped reduce transactions in the black and tried to stay on top of the new charges.
However, the Supreme Court rejected the interim measure.
Some important sectors will have an apartment ₹5, while capital market transactions will require a maximum amount of 0.02% MDR ₹300. Small traders receiving up to ₹1 lakh per month payments through UPI quick response codes have also been excluded from the MDR framework.
Read also | UPI MDR Charges Monitoring Center Daily from 15th October
The petitioner challenged the framework on constitutional and legal grounds, arguing that the government had not sufficiently explained the basis for ₹2,000 threshold or other classification. She also questioned the executive’s authority to determine which electronic payments should remain free.
The plea also raised concerns that merchants could end up passing on additional costs to consumers. It sought the repeal or suspension of the new framework or, alternatively, a new process based on published data and impact assessments.
