Supreme Court to examine plea challenging new UPI merchant charges

The Supreme Court will on Monday hear a PIL challenging the Centre's decision to impose a 0.4 per cent MDR on specified UPI merchant transactions above Rs 2,000. The petitioner has questioned the framework's legality, transparency and constitutional validity

New Delhi: The Supreme Court will on Monday hear a plea challenging the Centre’s decision to impose a Merchant Discount Rate (MDR) on specified UPI person-to-merchant transactions of over Rs 2,000.

The new framework, which is scheduled to come into effect from October 15, imposes a 0.4 per cent MDR on specified person-to-merchant (P2M) UPI transactions above Rs 2,000. The MDR will be capped at Rs 300 for transactions of Rs 75,000 and above.

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Essential and thin-margin sectors, including railways, telecom, insurance, fuel and agricultural inputs, will attract a flat MDR of Rs 5 per transaction above Rs 2,000. Payments into mutual funds, securities and through stockbrokers and dealers will attract an MDR of 0.02 per cent, capped at Rs 300.

Person-to-person (P2P) UPI transfers will continue to remain free irrespective of the amount, while payments to merchants up to Rs 2,000 will also remain free. The government has said around 96 per cent of P2M transactions will remain unaffected under the new framework.

According to the Supreme Court’s cause list for September 28, the plea will come up before a bench comprising Chief Justice of India Surya Kant and Justices Joymalya Bagchi and V Mohana.

The public interest litigation (PIL), filed by advocate Anjan Datta, challenges the Centre’s September 14 notification and the MDR framework announced on September 15.

The plea alleges that the levy was introduced without adequate statutory safeguards, transparency or public consultation. It also challenges the constitutional validity of the amended Section 10A of the Payment and Settlement Systems Act, 2007, alleging that it gives unguided powers to the executive to decide which electronic payment modes would receive no-charge protection.

The petitioner has sought a declaration that no MDR or analogous compulsory charge can be imposed or recovered solely on the basis of a press release or FAQs without a duly authorised, authenticated and published statutory instrument.

The plea has also questioned the distinction between UPI transactions and RuPay debit card payments, pointing out that the notification continues the no-charge protection for RuPay debit cards without a monetary ceiling.

It alleges that the framework is arbitrary and discriminatory and could adversely affect merchants, particularly those operating on low margins. The petitioner has also raised concerns over a possible indirect consumer burden and digital exclusion.

The plea has sought the quashing or suspension of the framework insofar as it imposes an MDR on UPI transactions above Rs 2,000.

Alternatively, it has sought reconsideration of the framework after transparent consultation, publication of empirical data and an impact assessment, besides safeguards for micro and small enterprises.

The petitioner has also sought a direction that any future MDR classification be based on factors including merchant turnover, statutory MSME status, actual margins, geography and ability to bear the cost, and avoid what it termed “cliff-edge treatment unsupported by evidence”.

The Centre and other entities, including the Reserve Bank of India, have been made party respondents in the matter.