Supreme Court Won’t Halt UPI MDR but Asks Centre to Explain the Charge

The top court did not pause the fee on UPI payments above ₹2,000 made to merchants. It has asked the Centre and others to reply to the petition against the levy.

The Supreme Court on Monday asked the Centre to respond to a petition against the new UPI MDR. The Merchant Discount Rate applies to person to merchant payments above ₹2,000. The court, however, did not stay the move.

The case is a public interest litigation filed by advocate Anjan Datta. A bench led by Chief Justice of India Surya Kant heard it. The bench said, “This is less of a legal and more of a technical issue. We need you (Centre) to state the facts on a short affidavit.”

Datta argued the matter along with advocate Ashutosh Dubey. Together, they challenged the Finance Ministry notification issued on September 14. It will come into force on October 15. The UPI MDR is set at 0.4 per cent on merchant payments above ₹2,000. The charge is capped at ₹300 for transactions above ₹75,000.

The Centre has made it clear that person to person UPI transfers remain free. This holds true no matter how much money is sent.

Additional solicitor general N Venkataraman appeared for the Centre. He told the court, “The decision is yet to come into effect on October 15. At the outset, I would clarify that 96 per cent persons using the UPI payment gateway are exempted. Even among the four per cent covered by this decision, essential services are capped.”

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Court Questions the Legal Basis of the Charge

The bench also included justices Joymalya Bagchi and V Mohana. It said it only wanted to know the legal source behind the levy. The judges asked, “What is the executive scope of imposing this charge? If it is a fee, it cannot be by way of an executive fiat. If not, then what is it?”

The ASG replied, “Not one rupee from this will go to the government. It is a settlement fee among the two players – bank and the service provider which the National Payments Corporation of India (NPCI) facilitates.”

The court said it would look at the matter closely once the response arrives. It will then be better placed to decide in whose hands the amount counts as “income”. The next step on UPI MDR now depends on the Centre’s affidavit.