From The Economic Times · ET Online · · 1m 30s
FM Rejects UPI MDR Misconception
FM Nirmala Sitharaman clarifies UPI MDR won't burden consumers.
In brief
FM Nirmala Sitharaman clarifies UPI MDR won't burden consumers. Union Finance Minister Nirmala Sitharaman states UPI MDR charges above Rs 2,000 will not be passed to customers, as the cost is handled by merchants and banks. Originally reported by The Economic Times.
FM rejects UPI MDR misconception
Union Finance Minister Nirmala Sitharaman dismisses opposition claims that UPI MDR charges above Rs 2,000 will burden consumers.
“This is not a tax, this is not a cess, and it is not even a surcharge.”
MDR not government-imposed
The MDR is collected by NPCI, merchant banks, and POS providers, not the government, and will not be passed to customers.
“The collection is not going to the Consolidated Fund of India.”
0.4% charge on transactions
A 0.4% MDR applies to UPI payments above Rs 2,000, with a cap of Rs 300 for transactions over Rs 75,000.
“The 0.4% charge on transactions above Rs 2,000 is a decision mutually agreed upon by banks.”
Comparison to card payments
Sitharaman compares UPI MDR to card payments, noting merchants do not pass card MDR costs to consumers.
“Even now, traders accept various cards: Visa, debit, or credit cards, on which an MDR is applicable, yet this cost is not passed on to the customer.”
Ministry ensures message holds
The finance ministry will engage Indian Banks Association to prevent MDR charges from being passed to consumers.
“We would talk to the IBA about the execution... Their members operate the POS machines.”
GST implications open
Whether MDR itself attracts GST remains under discussion, with the GST Council to examine an 18% tax.
“We expect the Council to be more inclined to be reasonable on this and take a favourable decision as this concerns the common man.”
MDR framework details
Transactions up to Rs 2,000 and person-to-person UPI transfers remain exempt from MDR charges.
“Transactions up to Rs 2,000 and all person-to-person UPI transfers remain exempt.”
Fintech ecosystem support
The MDR charges help fund the fintech ecosystem, as government subsidies have been insufficient.
“The subsidy the government provides to payment service providers has not been sufficient, the official added, and these charges are needed to help the fintech ecosystem develop further.”
What happens next
The GST Council will review MDR tax implications ahead of its October 7 meeting, focusing on procedural relaxations.
“No formal proposal on any tax rate change is on the agenda for the October 7 GST Council meeting.”
The main idea
Union Finance Minister Nirmala Sitharaman states UPI MDR charges above Rs 2,000 will not be passed to customers, as the cost is handled by merchants and banks.