Proposed UPI Merchant Discount Rate not a tax, cess or surcharge; will not burden consumers: FM
The Finance Minister said the MDR is a charge within the digital payments ecosystem and is being levied by entities facilitating UPI transactions, including payment service providers, merchant's bank and other ecosystem participants.
Finance Minister Nirmala Sitharaman clarified that the proposed Merchant Discount Rate (MDR) on high-value UPI transactions is not a tax, cess, or surcharge, and will not burden consumers. Rejecting opposition criticism, she stated that MDR is a charge within the digital payments ecosystem, levied by entities like payment service providers, banks, and other ecosystem participants.
The collection will not go to the government's Consolidated Fund of India. Of the total MDR collected, 40% will be given to customers' banks, 30% to the payment gateway, 20% to the UPI app, and 10% to the sponsoring bank of the UPI app. Sitharaman assured that consumers will not bear the MDR, which will be absorbed within the merchant payment ecosystem.
The new MDR of 0.4% on transactions above Rs 2,000 will not affect essential services and essential services, while small merchants up to Rs 1 lakh per month remain exempt.
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