Finance Minister Nirmala Sitharaman on Monday clarified that the proposed amendment to the Payment and Settlement Systems Act, 2007, does not impose any tax or transaction charge on users making payments through the Unified Payments Interface (UPI).
Speaking in the Rajya Sabha, Sitharaman said the proposed amendment to Section 10A of the Payment and Settlement Systems Act is only an enabling provision and does not introduce a Merchant Discount Rate (MDR) framework at this stage.
"The enabling provision we are bringing in does not impose any tax or transaction charge on UPI users," Sitharaman said.
She added that once Parliament passes the proposed legislation, the UPI and Services Steering Committee of the National Payments Corporation of India (NPCI) will consider whether an MDR should be introduced.
"So, no MDR framework has been finalised," the Finance Minister said.
No Charges For P2P UPI Transactions
The clarification comes amid growing speculation that UPI transactions could attract fees following the government's proposed amendments. In a statement issued on Aug. 8, the Ministry of Finance said person-to-person UPI transactions will continue to remain free of charge.
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The government said that if MDR is introduced, it would apply only to a limited set of merchant transactions above a specified threshold and would be charged at a nominal rate. The rate, it said, would be significantly lower than the MDR applicable to debit or credit card transactions.
"Most transactions will remain free of charge for merchants on UPI," the ministry said.
The government also clarified that any MDR, if introduced, would be threshold-based rather than being imposed across all UPI transactions.
The Finance Ministry also rejected reports suggesting that external influences were behind the proposed policy changes. Calling such reports "unfounded, completely false and misleading", the ministry said India's approach towards UPI has been driven by its objective of creating a widely accessible digital payments ecosystem.
The government pointed out that UPI was introduced in 2016 and has remained free of charge for both merchants and citizens since January 2020. It also highlighted India's achievement in developing UPI into the world's largest real-time interoperable payment system.
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