If neither tax nor fee, what is this ‘expropriation’, Supreme Court asks Govt on UPI MDR charges
The Supreme Court of India has issued a notice to the government regarding the legality of a 0.4% merchant discount rate (MDR) on UPI transactions exceeding ₹2,000. The court questioned the nature of this charge, noting it is classified as neither a tax nor a fee.
Why it matters
The case challenges the executive's power to impose charges on digital payment systems, which could impact the cost and adoption of UPI for merchants and consumers.
The Supreme Court on Monday (September 28, 2026) refused a plea for an interim stay of a decision by the government to levy 0.4% charge on merchants for specified UPI person-to-merchant transactions in excess of ₹2,000.
A three-judge Bench headed by Chief Justice of India Surya Kant issued notice to the Union of India and directed the filing of counter affidavits within four weeks. The National Payments Corporation of India (NPCI) had introduced the merchant discount rate (MDR) of 0.4% on UPI payments from October 15.
During the brief hearing, Justice Joymalya Bagchi asked Additional Solicitor General N. Venkataraman what exactly was the nature of the MDR.
“It is neither a tax nor a fee... So what is the exigency of making this expropriation?” Justice Bagchi asked.
The petition was filed by advocate Anjan Datta, challenging the Centre’s September 14 notification and the MDR framework announced on September 15.
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