Supreme Court refuses to stay UPI merchant fee, seeks Centre's response

The Supreme Court on Monday sought a response from the central government and other parties on a petition challenging the government's decision to impose a Merchant Discount Rate (MDR) on UPI person-to-merchant transactions above Rs 2,000.

A bench of Chief Justice Surya Kant along with Justices Joymalya Bagchi and Justice V. Mohan agreed to hear the petition and directed the central government, the Reserve Bank of India (RBI) and other respondents to file their affidavits within four weeks.

However, the bench refused to grant an interim stay on the Centre's decision to impose the MDR, meaning the charge will remain in effect for now.

Additional Solicitor General N. Venkataramani, appearing for the central government, told the bench that 96 percent of people using payment gateways have been exempted from this charge.

On this, the bench observed, "This issue is more technical in nature than legal."

After the court issued notice and directed the respondents to file affidavits within four weeks, the petitioner's counsel requested the bench, "A stay should be granted until then."

However, the bench again refused to grant an interim stay. Advocate Anjan Dutta had filed this public interest litigation (PIL).

Ending nearly six years of UPI payments being completely free, the government has, from October 15, imposed a 0.4 percent charge on transfers made to merchants of more than Rs 2,000 through the UPI platform. However, everyday person-to-person transactions and small payments have been explicitly excluded from this charge.

For payments of Rs 75,000 and above, the MDR will be capped at a maximum of Rs 300, meaning the charge will not exceed this limit regardless of how large the amount is.

Essential, low-margin sectors such as railways, telecom, insurance, fuel and agricultural inputs will attract a flat MDR of Rs 5 per transaction for transactions above Rs 2,000.

Payments made through mutual funds, securities and stock brokers and dealers will attract an MDR of 0.02 percent, also capped at Rs 300.

Person-to-person (P2P) transfers, which account for 37 percent of total UPI transaction volume and 70 percent of transaction value, will remain completely free of charge regardless of the amount involved.