‘UPI MDR Is Neither Tax Nor Cess’: Sitharaman Accuses Opposition Of Spreading Misinformation – Delhi News Daily

Last Updated:September 21, 2026, 22:54 IST

Sitharaman said the MDR is a charge levied by service providers to improve the system and provide better service, not for small transactions.

A 0.4 per cent MDR will apply from October 15 to specified person-to-merchant UPI transactions above Rs 2,000, with the charge capped at Rs 300 per transaction. (Image: @NITIAayog/X)

Union Finance Minister Nirmala Sitharaman on Monday said that Merchant Discount Rate (MDR) transaction charges for UPI transactions above Rs 2,000 is “neither a tax nor a cess” and accused the opposition of spreading misinformation on the matter.

Sitharaman said the MDR is a charge levied by service providers to improve the system and provide better service, not for small transactions.

“It does not apply to transactions below ₹2,000. It is neither a tax nor a cess; the funds will not be deposited into the Consolidated Fund of India… Moreover, it is a charge between operators; it will not be passed on to the consumer. The burden does not fall on the customer. I provided a clarification on this very point when the issue was raised during the parliamentary session. Spreading misinformation, fueling debates based on it, and using that narrative to attack the government has become a habit for the opposition. This is wrong; there is an effort to spread misconceptions and mislead the public. The public needs to remain vigilant,” she said.

A 0.4 per cent MDR will apply from October 15 to specified person-to-merchant UPI transactions above Rs 2,000, with the charge capped at Rs 300 per transaction. Person-to-person transactions will remain free, while payments to merchants up to Rs 2,000 and transactions covered under the zero-MDR framework for small merchants will also remain free.

Lok Sabha Leader of Opposition Rahul Gandhi had earlier termed the MDR on UPI transactions as “UPI tax” and demanded its immediate withdrawal.

What Industry Experts Said?

Santosh Katariya, President of the Clothing Manufacturers Association of India (CMAI), said the introduction of MDR on UPI at the start of the festive season could not have come at a more challenging time for the industry.

“This period is critical for merchants, retailers and consumer-facing businesses, many of whom are already working hard to revive demand and improve margins. Adding another cost to digital transactions at this juncture risks putting further pressure on an ecosystem that is still finding its footing,” he said.

Katariya said UPI has been a powerful enabler of consumption and formalisation, adding that any move that increases the cost of digital payment acceptance needs to be carefully calibrated, particularly during the country’s most important sales period of the year.

Dr. Ashish Chandra, Founder and CEO of GFF AI PTE. LTD., Singapore, said the proposed charge may appear modest but could have a significant impact on businesses operating on thin margins.

“A ₹40 fee on a ₹10,000 transaction, for instance, represents 20% of the profit on a sale made at a 2% net margin. This makes transparency around costs, exemptions and settlement deductions particularly important,” he said.

Chandra added that the real measure of value should go beyond transaction volumes. “Payment providers should publish meaningful service metrics, including transaction success rates, outage duration, refund timelines, settlement reliability, dispute resolution and fraud-related losses. Merchants should be able to connect the fee they pay with measurable improvements in these areas,” he said.

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What is the Merchant Discount Rate (MDR) on UPI transactions, and who does it apply to?

Union Finance Minister Nirmala Sitharaman clarified that the Merchant Discount Rate (MDR) is a service charge levied between operators and is neither a tax nor a cess, meaning funds are not deposited into the Consolidated Fund of India. A 0.4 percent MDR will apply from October 15 to specified person-to-merchant UPI transactions above Rs 2,000, while transactions below Rs 2,000, person-to-person payments, and small merchant transactions remain free.

Will consumers be required to pay any extra charges for UPI transactions under the MDR framework?

No, the MDR charge will not be passed on to the consumer or the customer, and the financial burden will not fall on them. Ordinary users will continue to make UPI payments for free, as the fee is entirely levied on merchants to help service providers invest in infrastructure, security, and system improvements.

How have industry experts reacted to the introduction of MDR on UPI transactions?

Industry experts expressed mixed concerns regarding the timing and impact of the charge. Santosh Katariya of CMAI noted that introducing MDR at the start of the festive season risks putting pressure on businesses trying to revive demand. Meanwhile, Dr. Ashish Chandra of GFF AI pointed out that even a modest fee can impact thin-margin businesses, emphasizing the need for transparency on metrics like success rates, fraud losses, and settlement reliability.

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Saurabh VermaDeputy News Editor

Saurabh Verma is a Deputy News Editor at News18.com, specialising in Indian politics and breaking global news. With years of experience tracking election strategies, he decodes domestic issues for mil…Read More

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