Dharwad Chamber of Commerce and Industries seek withdrawal of MDR on UPI transactions

The Dharwad Chamber of Commerce and Industries has requested the government to waive Merchant Discount Rate (MDR) charges on certain UPI transactions, arguing that the levy would burden traders and potentially increase consumer prices. In a letter to the Finance Minister, submitted through the Deputy Commissioner of Dharwad, the chamber endorsed digital payments but sought the removal of MDR provisions from the Act.

The chamber questioned the logic behind imposing MDR on transactions exceeding ₹2,000, deeming the proposed ₹300 cap discriminatory. They contended that shifting the burden from the payer to the merchant contradicts the idea of ease of doing business. The additional cost could disproportionately affect traders dealing with goods with printed MRP and operating on thin margins, potentially leading them to absorb the cost until revised MRP items reach the market.

The chamber also warned that MDR could incentivize consumers to revert to cash payments, undermining digital payment promotion efforts and increasing government costs related to currency management. The chamber posited that UPI, as a government-backed payment system, should not incur merchant charges and suggested the government should bear the cost, similar to how it handles currency printing and distribution.

Lastly, the chamber proposed a Merchant Service Recognition Fund, funded by reserving a small portion of taxes collected from merchants, including GST. This fund could acknowledge merchants' contributions to tax collection, job creation, and service delivery.