Retailers, fuel pump dealers, and industry bodies are opposing the new UPI Merchant Discount Rate (MDR) framework scheduled to take effect on October 15, which imposes a flat Rs 5 MDR on person-to-merchant UPI transactions exceeding Rs 2,000 in essential and thin-margin sectors. Union Finance Minister Nirmala Sitharaman clarified that MDR is a charge by service providers to improve UPI infrastructure and is not a tax or cess, emphasizing it will not be passed on to consumers, according to medianama.com.
The MDR framework also includes a 0.02% charge capped at Rs 300 for capital market transactions involving mutual funds, securities, and stockbrokers, while the standard MDR rate for specified UPI transactions above Rs 2,000 is 0.4%. Despite these details, merchants argue that the levy is unworkable due to their thin profit margins. For example, the Madhya Pradesh Petroleum Dealers Association reported that petrol pump dealers in the state could lose an estimated Rs 18,000 monthly because of the MDR, leading some to threaten to stop accepting UPI payments for high-value purchases, medianama.com reported.
The resistance highlights concerns that the MDR could undermine digital payment adoption among small merchants, who fear the additional cost burden. The debate reflects broader tensions over who should bear the cost of maintaining and upgrading digital payment infrastructure. While the government stresses the MDR supports better services, merchants contend that the cost should not fall on them, especially in sectors with tight margins. This pushback comes amid growing reliance on UPI for transactions across India, making the MDR a contentious issue in the payments ecosystem, according to medianama.com.
The MDR framework will officially begin on October 15, with the flat Rs 5 charge applying to UPI transactions above Rs 2,000 in specified sectors. The Madhya Pradesh Petroleum Dealers Association's decision to potentially stop accepting such payments underscores the immediate impact of the policy on merchant behavior, as detailed by medianama.com.