The merchants may charge 0.25% to 0.40% on UPI payments made above Rs 2,000. 95% of transactions will not be subject to the merchant discount rate.
Merchants may charge up to 0.40% on UPI payments above Rs 2000: Union Finance Minister Nirmala Sitharaman introduced the ‘Taxation and Other Laws (Amendment) Bill’ in Parliament on Tuesday. The bill proposes removing the ban on banks and payment service providers charging MDR on notified digital payment methods. Government officials said that no decision has yet been taken on when the proposal will be implemented.
The government may soon allow merchants to charge a merchant discount rate (MDR) for UPI transactions in the coming days. The merchants may charge 0.25% to 0.40% on UPI payments made above Rs 2,000. However, payments made from one person’s normal UPI account to another person’s normal UPI account will not incur any charges. According to government estimates, the Rs 2,000 limit covers 5% of all UPI transactions. But these transactions account for 65% of the total transaction value. This is unlikely to affect purchases of things like milk, vegetables and groceries or payments for using auto-taxis. An official said 95% of transactions will not be subject to the merchant discount rate. The government can fix a ceiling on the total amount to be charged.
It is worth noting that MDR is currently charged on credit cards and debit cards, but most merchants do not pass it on to customers.
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