The Supreme Court will hear on Monday (September 28, 2026) a plea challenging the Centre's decision to impose MDR on specified UPI person-to-merchant transactions of over ₹2,000. According to PTI, the public interest litigation filed by advocate Anjan Datta will come up for hearing before a bench of Chief Justice of India Surya Kant and Justices Joymalya Bagchi and V Mohana. The case comes as the government moves to change the zero-MDR framework that has applied to UPI payments for nearly six years, with the new framework set to come into effect from October 15, 2026. The plea alleges that the levy has been introduced without adequate statutory safeguards, transparency or public consultation.
Mobile phone retailers across India plan to observe October 2 as "No UPI Day" in protest against the 0.4% Merchant Discount Rate (MDR) charges on UPI transactions. According to The Times of India, the All India Mobile Retailers Association (AIMRA) has called for this symbolic protest to highlight concerns of mobile retailers regarding the new MDR framework. AIMRA Vice President and Delhi NCR President Tarvinder Singh announced that retailers will symbolically cover UPI QR Codes with black cloth and refrain from accepting UPI payments on Gandhi Jayanti. Singh emphasized that "If we want Digital India, UPI must remain zero MDR. This is not a protest against UPI or Digital India. Our concern is the additional financial burden being placed on merchants who accept digital payments." The protest comes as the Supreme Court will hear on Monday (September 28, 2026) a plea challenging the Centre's decision to impose MDR on specified UPI person-to-merchant transactions of over ₹2,000.
The new MDR framework is expected to have a significant financial impact on small retailers. As per The Times of India, AIMRA estimates that 0.4% MDR will impose an unsustainable burden of approximately ₹40 crore per month and nearly ₹500 crore per annum on small mobile retailers across India. According to the association's representation to Finance Minister Nirmala Sitharaman, the move to impose MDR on UPI will lead to an immediate net monthly loss of ₹2,000 to ₹12,000 for a small retailer processing ₹5 lakh to ₹30 lakh monthly via UPI. The framework explicitly ring-fences everyday person-to-person transactions and small payments from any charge, with person-to-person transfers continuing to attract zero charges irrespective of size. Person-to-person UPI transactions, which account for 37% of transaction volume and 70% of transaction value, will continue to attract zero charges irrespective of the transaction size.
The petitioner has challenged 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 the no-charge protection. As reported by PTI, the plea states that "Declare that no MDR or analogous compulsory charge may be imposed or recovered merely on the strength of a press release or FAQs absent a duly authorised, authenticated and published statutory instrument." The petitioner 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. The plea argues that the framework could increase costs for merchants, particularly businesses operating on thin margins, and could eventually create an indirect burden on consumers. The petitioner has sought quashing or suspension of the MDR framework insofar as it applies to UPI transactions above ₹2,000, alternatively requesting a fresh review based on transparent consultation, publication of relevant data and an impact assessment, along with safeguards for micro and small enterprises.
According to a government statement published on September 15, MDR is a charge within the merchant payment ecosystem, and hence does not apply to customers making UPI payments. As reported by PTI, banks have also been strictly advised to ensure that merchants do not pass MDR charges on to customers. However, the plea argues that there is a potential indirect burden on consumers through increased merchant costs. According to The Times of India, Finance Minister Nirmala Sitharaman clarified that the MDR is not a government charge and that consumers will not be required to pay it. She explained that "The MDR is being charged by NPCI, the aggregator, the service provider, those who provide the POS machines and the merchant bank. They are the ones providing the service for transactions above ₹2,000. The merchant is the one who is going to pay. That money is not coming to the Government of India and we are not imposing it." The framework includes specific caps and exemptions, with transactions of ₹75,000 and above capped at ₹300 per transaction, and flat MDR of ₹5 per transaction for essential sectors including railways, telecommunications, insurance, fuel and agricultural inputs. Additionally, a separate, much lower MDR of 0.02% applies to capital-market-related UPI payments, capped at ₹300 per transaction, covering mutual funds, securities, stock brokers and dealers.
Ahead of the Goods and Services Tax (GST) Council meeting on October 7, the industry has urged the council to allow businesses to use their available input tax credit (ITC) to pay tax under the reverse charge mechanism (RCM), instead of requiring them to first pay the tax in cash and claim the same amount as credit. According to reports from Business Standard, this change would address the current working-capital burden that businesses face when paying GST on RCM transactions in cash. The industry's demand has gained additional momentum following recent government notifications that enable taxpayers to report negative ITC values in their GST returns. AIMRA's clear demand is that UPI merchant payments should continue under a Zero MDR structure, emphasizing that if India wants Digital India to grow further, digital payments should remain affordable for the entire retail ecosystem. The Indian Banks' Association is expected to put in place a mechanism to ensure that merchants do not recover the charge from consumers, while the finance ministry is also expected to hold discussions with merchants and the Confederation of All India Traders on concerns related to the new framework.
