Ahmedabad, Sep 16 (SocialNews.XYZ) Opposition parties in Gujarat have criticised the Centre's decision to introduce a 0.4 per cent Merchant Discount Rate (MDR) on specified UPI payments to merchants above Rs 2,000 from October 15, describing it as a burden on traders and warning that costs could eventually be passed on to consumers.
The Congress, in a statement issued on Wednesday by Gujarat Congress In-charge Randeep Singh Surjewala and State Congress President Amit Chavda, alleged that the move amounted to a "digital U-turn" and accused the state government of betraying users of the Unified Payments Interface (UPI).
The Aam Aadmi Party (AAP) also opposed the move, with its Gujarat organisational general secretary Manoj Sorathiya calling it a "royal decree" and saying his party would take to the streets if required.
The criticism follows the state government's notification and the subsequent framework announced by the National Payments Corporation of India (NPCI).
Under the new system, a 0.4 per cent MDR will apply to specified person-to-merchant (P2M) transactions above Rs 2,000, capped at Rs 300 for transactions of Rs 75,000 or more.
Payments to merchants of up to Rs 2,000 will remain free.
Person-to-person (P2P) transactions will also remain completely free irrespective of the amount. The state government has also specified lower charges for some sectors.
Transactions above Rs 2,000 involving railways, telecommunications, insurance, fuel and agricultural inputs will attract a flat MDR of Rs five.
Capital-market transactions will attract an MDR of 0.02 per cent, capped at Rs 300.
Small merchants receiving up to Rs one lakh a month through UPI QR codes under the specified small-merchant category will continue under the zero-MDR framework.
The Finance Ministry has stressed that MDR is neither a tax collected by the government nor a charge payable by customers.
It is a merchant-side charge distributed among participants in the payments ecosystem, including banks and payment-service providers.
Banks have been advised to ensure that merchants do not pass the MDR on to customers, while UPI applications have been barred from imposing platform or hidden charges for these payments.
The state government estimates that about 96 per cent of merchant transactions will remain unaffected.
Sorathiya, however, said that the additional cost would ultimately affect traders.
"Our country's retail traders have a profit margin of barely 5 to 7 per cent," he said, adding that the 0.4 per cent MDR would put an additional burden on them and could ultimately be recovered from consumers.
He also questioned the need for the new charge, saying that NPCI already operates a profitable payments infrastructure.
"UPI had helped increase digital transactions and bring financial activity into the formal economy, and the charges could encourage some users to return to cash," he added.
The Congress statement made a similar argument, but went further by calculating a potential annual burden of Rs 5,040 crore on P2M transactions if five per cent of projected 2026-27 UPI transaction value falls within the new framework.
It also said that any future expansion of the rate or categories covered could increase the burden substantially.
The government's current framework, however, does not impose the 0.4 per cent charge on all UPI transactions or on P2P transfers.
The Centre said the new system is designed to provide a sustainable revenue model for the rapidly expanding UPI ecosystem while protecting individuals and small merchants.
UPI, developed by NPCI, an RBI-regulated entity, has become the backbone of India's retail digital-payments system.
"PhonePe and Google Pay together account for about 80 per cent of UPI's market by value, making the new MDR framework significant for payment-service providers as well as banks and merchants," the Congress said.
The Congress statement also questioned whether the new framework could benefit large foreign-backed payment companies.
The immediate change from October 15, therefore, is limited to specified merchant-side transactions rather than a general charge on UPI users.
Source: IANS
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