Winning Bizness Desk

Mumbai.Supreme Court Refuses Stay On UPI Charges Above Rs 2,000 From October 15

The Supreme Court has refused to stay the Centre’s decision to impose a 0.4% Merchant Discount Rate (MDR) on specified UPI merchant payments above Rs 2,000 from October 15. The court, however, issued notice to the Centre and sought a response on the legal and regulatory basis for introducing the new charge.

A three-judge bench headed by Chief Justice Surya Kant and comprising Justices Joymalya Bagchi and V Mohana heard a public interest litigation filed by advocate Anjan Dutta challenging the new UPI charge framework.

Petitioner Questions The Rs 2,000 Threshold

Dutta questioned why the government had fixed the threshold at Rs 2,000 and why different rules were being applied to UPI and RuPay transactions. The petition seeks cancellation of the new charge and challenges the manner in which the framework was introduced.

The petitioner has also challenged Section 10A of the Payment and Settlement Systems Act, 2007, arguing that it gives the government the power to decide which digital payment transactions should remain free and which should attract charges.

Government Says Most Small Payments Stay Free

Additional Solicitor General N Venkataraman, appearing for the Centre, told the court that person-to-person UPI transfers would continue to remain free. The government has also said that the new system will not affect most small merchant transactions. It has estimated that around 96% of merchant transactions will remain outside the charge structure.

The new MDR is scheduled to come into force on October 15, 2026.

Who Will Pay The New UPI Charge

The 0.4% MDR will apply to specified person-to-merchant UPI transactions above Rs 2,000. The charge will be borne by the merchant rather than the customer.

The key rules include:

• Merchants collecting more than Rs 1 lakh through UPI in a month will be covered by the MDR framework.
• UPI merchant payments of Rs 2,000 or less will remain free.
• Small merchants with monthly UPI collections of up to Rs 1 lakh will not pay MDR even when an individual payment exceeds Rs 2,000.
• If a merchant crosses the Rs 1 lakh monthly threshold for three consecutive months, banks will classify the merchant under the applicable higher category.

Rs 300 Cap Applies To Larger Payments

The new framework also puts a ceiling on the amount that can be charged. For payments of Rs 75,000 or more, the MDR will be capped at Rs 300 per transaction, along with applicable GST.

The Rs 2,000 threshold will be assessed separately for each payment or bill. It will not be calculated by adding up the merchant’s total sales during the day.

Person-To-Person UPI Transfers Remain Outside Framework

The new charge is meant for specified person-to-merchant transactions. Ordinary transfers between two individuals will continue to remain free, irrespective of the amount involved.

This distinction is central to the government’s position before the Supreme Court, as the Centre has maintained that ordinary users sending money to one another will not be charged.

Court Seeks Clarity On Legal Basis

The Supreme Court has not passed a final order on the legality of the new MDR framework. Instead, it has sought responses from the authorities concerned while declining to stop its implementation at this stage.

The petition raises questions over the statutory authority for introducing the charge and the procedure followed before the new system was notified.

What Exactly Is Merchant Discount Rate

MDR is the charge associated with accepting digital payments through a payment network. It is paid by the merchant to the banks and payment-system participants involved in processing the transaction.

Under the proposed UPI framework, the charge will apply to specified merchant payments above the prescribed threshold.

In simple terms:

• MDR is a merchant-side charge.
• It is linked to the cost of processing digital payments.
• Customers are not supposed to pay the MDR separately.
• Payments within the specified free categories will continue without the charge.

New Rules Mark Change In UPI Payments

The new framework marks a change after years in which UPI merchant payments were largely available without a direct MDR. The government has maintained that the new structure will keep smaller transactions outside the charge while creating a payment mechanism for specified higher-value merchant transactions.

The Supreme Court’s refusal to grant an interim stay means the October 15 implementation schedule remains in place for now, while the legal challenge and responses from the authorities remain before the court.