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Sitharaman: UPI MDR Not a Tax, Accuses Opposition of Misinformation
- •Finance Minister Nirmala Sitharaman clarified that Merchant Discount Rate (MDR) on UPI transactions above Rs 2,000 is a service charge, not a tax or cess, and funds will not go to the Consolidated Fund of India.
- •Sitharaman stated that the MDR applies only to transactions over Rs 2,000, is a charge between operators, and will not be passed on to consumers.
- •She criticized the opposition for spreading misinformation and misleading the public regarding the UPI MDR.
- •A 0.4% MDR, capped at Rs 300, will apply from October 15 to specified person-to-merchant UPI transactions above Rs 2,000; person-to-person and small merchant transactions remain free.
- •Industry experts expressed concerns that the MDR introduction, especially during the festive season, could negatively impact businesses already facing challenges and operating on thin margins.
Key Questions Answered
Union Finance Minister Nirmala Sitharaman clarified that the Merchant Discount Rate (MDR) is a service charge levied between operators and is neither a tax nor a cess, meaning funds are not deposited into the Consolidated Fund of India. A 0.4 percent MDR will apply from October 15 to specified person-to-merchant UPI transactions above Rs 2,000, while transactions below Rs 2,000, person-to-person payments, and small merchant transactions remain free.
No, the MDR charge will not be passed on to the consumer or the customer, and the financial burden will not fall on them. Ordinary users will continue to make UPI payments for free, as the fee is entirely levied on merchants to help service providers invest in infrastructure, security, and system improvements.
Industry experts expressed mixed concerns regarding the timing and impact of the charge. Santosh Katariya of CMAI noted that introducing MDR at the start of the festive season risks putting pressure on businesses trying to revive demand. Meanwhile, Dr. Ashish Chandra of GFF AI pointed out that even a modest fee can impact thin-margin businesses, emphasizing the need for transparency on metrics like success rates, fraud losses, and settlement reliability.
