Government Dismisses Claims of External Influence on UPI MDR Policy

The government dismissed allegations of external pressure leading to the introduction of the Merchant Discount Rate on UPI transactions, clarifying no extra GST is involved. Officials emphasize the move supports a sustainable revenue model for emerging fintech while keeping most transactions free. Monitoring begins October 15.

The government has categorically refuted any suggestion that the newly introduced Merchant Discount Rate (MDR) on UPI transactions was imposed under external pressure, describing such claims as 'false and misleading.'

Officials stated there is no separate GST on MDR charges, and businesses can claim full input tax credit, negating any net revenue gain for the government. This contradicts speculation of a new GST burden on UPI users, which the GST Council will address if concerns remain.

Since its inception, UPI has expanded from 1.78 crore to over 24,000 crore transactions annually. A recent government notification kept transactions under Rs 2,000 free but introduced a tiered MDR structure beyond this limit. Unique to this amendment, RuPay debit cards remain MDR-free, maintaining a competitive edge over foreign-issued cards, countering narratives of foreign influence.

The MDR rates support fintech growth by providing a sustainable revenue model, particularly vital after the 2020 cap on UPI players' market share at 30%. Most transactions, especially those by small merchants, remain fee-exempt, encouraging industry competition without burdening consumers.

Slated to take effect on October 15, authorities will closely observe the MDR rollout to ensure merchants do not transfer costs to customers, confident it will neither hinder UPI usage nor spur cash transactions.