- The Supreme Court sought responses on the MDR imposed on UPI transactions above Rs 2,000
- The court directed the Centre, RBI, and others to file counter affidavits within four weeks
- The bench refused to grant an interim stay on the MDR decision sought by the petitioner
The Supreme Court of India has issued notice to the Union of India, Reserve Bank of India and the National Payments Corporation of India (NPCI) in a challenge to the proposed processing fee to be imposed on transactions above Rs 2000 on the Unified Payments Interface (UPI).
While refusing a request to stay the UPI Merchant Discount Rate (MDR) proposal, a three-judge bench of the top court led by Chief Justice Surya Kant, sought a better legal understanding of the proposed levy, on how it will be taxed, where the tax incidence arises and on whom the tax incidence falls.
The Supreme Court also sought an explanation on the scope of executive power to issue the MDR proposal and the rationale for the proposal.
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The Attorney General of India R. Venkataramani appeared on behalf of the government, explained that the fee is similar to what is charged on debit and credit card transactions, and takes the form of a processing fee for service providers, in this case, payment aggregators and banks.
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The government takes no part of this fee, Venkatramani stressed, making clear this was not a government levy.
"The government does not take a rupee out of this," stressed Venkataramani, while adding that this was purely an administrative mechanism.
The Attorney General also argued that the MDR will affect only 4% of all UPI transactions and has been capped at Rs 300, with collection charge less than 0.5%.
The Supreme Court bench directed the government to provide legal clarity on the position in an affidavit, along with responses from the RBI and NPCI within four weeks, while declining to stay the proposed October 15 implementation of the UPI MDR.
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