Opposition parties, including CJP and Congress, have slammed the BJP-led government over the proposed 0.4% Merchant Discount Rate (MDR) on UPI payments above Rs 2,000, calling the move "outright robbery" and demanding its immediate rollback.

Cockroach Janta Party (CJP) Founder Abhijeet Dipke on Saturday launched a scathing attack on the BJP-led Union government over proposed Merchant Discount Rate (MDR) transaction charges for UPI, calling the move "outright robbery" and demanding its immediate withdrawal. Addressing the media, Dipke argued that the government spoke of a cashless economy after demonetization, and now that people have adopted it, the governemt has imposed taxes on it. "I feel this is outright robbery. The charges being levied on UPI should be withdrawn. You (government) spoke of a cashless economy when demonetization was introduced, and now that people have actually adopted a cashless economy, you are imposing taxes on it as well. This decision must be rolled back immediately," Abhijeet Dipke told ANI.

Widespread Opposition to UPI Charges

Echoing similar concerns, Congress MP Rajeev Shukla criticised the introduction of charges despite earlier assurances. "The party had clarified its stand regarding UPI. The government should withdraw the UPI tax; the tax should not be imposed. The Finance Ministry had previously stated that no tax would be levied, yet the tax has now been introduced," Rajeev Shukla told reporters.

BJD Rajya Sabha MP Subhashish Khuntia also voiced apprehension on the impact of charges on UPI transactions, emphasising that tax would place an additional burden on small traders. “The charges on UPI transactions would directly affect small businesses and street vendors. Even basic transactions can exceed Rs 2,000, and such a tax would place an additional burden on small traders. The government should reconsider the proposal and not impose it," Subhashish Khuntia told ANI.

The remarks came after traders’ organisations opposed the 0.4 per cent Merchant Discount Rate (MDR) on UPI payments above Rs 2,000, saying the move would impose an additional burden on businesses, and warned of agitation if implemented.

On Friday, Congress MP Pawan Khera targeted the BJP-led Union government over the 0.4 per cent Merchant Discount Rate on UPI transactions above Rs 2,000, alleging that the ruling party is dismantling its own initiative of a cashless economy due to "fear of the United States." "Out of fear of America, you are completely abandoning your own initiative in your own country. You even stole the credit from Nandan Nilekani and Dr. Manmohan Singh, claiming you were bringing a cashless economy to this country. And now, you're the one working to destroy that cashless economy," said Khera. Addressing a press conference in Indore, Khera claimed that consumers under the new NPCI framework will bear the cost of the 0.4 per cent MDR tax on UPI, asserting that the government cannot expect traders to absorb all the losses themselves, as they have to run their business The Doon Udyog Vyapar Mandal and other local traders’ organisations said traders are already paying income tax and GST and would not be willing to bear an additional cost on UPI transactions.

A Defence for MDR

Meanwhile, Former Standard Chartered Bank Managing Director Sanjeev Mehta has said the introduction of a Merchant Discount Rate (MDR) on select UPI transactions is necessary to support the cost of maintaining and expanding the country's digital payments infrastructure, amid a debate over whether the new charge could raise costs for merchants and consumers. “Someone will bear that cost,” Mehta said, adding that running the entire payments ecosystem free of charge was not sustainable.

'No Direct Cost to Consumers'

On concerns that merchants could pass the MDR on to consumers, Mehta said the government had structured the charge in a way that would limit its impact on consumers. The government has said MDR is a charge within the merchant payment ecosystem and not a charge imposed on customers, and banks have been advised to ensure merchants do not pass it on to consumers.

He further said the maximum Rs 300 cap should not be viewed as a direct cost to consumers, arguing that available data indicates no significant consumer-level impact from the measure. Mehta said the introduction of MDR could also provide a source of revenue to participants in the UPI ecosystem, allowing them to sustain the infrastructure and develop new payment methods and use cases. He said new use cases could emerge on the UPI infrastructure as fintech companies and other participants develop payment products on the network.

The New NPCI Framework

The National Payments Corporation of India (NPCI) on September 15 introduced a new Merchant Discount Rate (MDR) framework, under which UPI merchant transactions above Rs 2,000 will attract an MDR of 0.4 per cent, while consumers will continue to transact free of cost using UPI. The government has said around 96 per cent of P2M transactions will remain unaffected, while MDR will be distributed among payment ecosystem participants, including banks and payment application providers.

Under the new framework, an MDR of 0.4 per cent will apply to Person-to-Merchant (P2M) UPI transactions above Rs 2,000, with the MDR capped at Rs 300 per transaction. (ANI)

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