UPI Charge Not Tax, 96% Transactions Won't Be Unaffected: Government Sources

The Centre's decision to introduce a Merchant Discount Rate (MDR) on selected high-value Unified Payments Interface (UPI) transactions from October 15 has prompted questions over whether the move amounts to a new tax on digital payments.The government and the National Payments Corporation of India (NPCI), which operates UPI, have said that MDR is a merchant-side payment-processing charge, not a tax, cess or surcharge. The money is not credited to the Government of India's Consolidated Fund and is instead distributed within the payments ecosystem.Under the new framework, a 0.4 per cent MDR will apply to specified person-to-merchant (P2M) UPI transactions above Rs 2,000, with the charge capped at Rs 300 for transactions of Rs 75,000 and above.