The intervention came after Gandhi, the Leader of Opposition in the Lok Sabha, demanded a rollback of the framework and described the charge as a “UPI tax”. He also alleged that the policy reflected pressure from the United States, a claim rejected by the Finance Ministry, which said decisions on the digital payments system were taken independently.
The Parliamentary Standing Committee on Finance had called for a tiered MDR or other viable revenue framework for UPI as part of efforts to make the payments ecosystem financially sustainable. Its report said the mechanism should be notified and operationalised without delay, while warning against dependence on government support to finance payment infrastructure, cybersecurity and service expansion.
Five Congress MPs — P Chidambaram, Manish Tewari, Gaurav Gogoi, Kishori Lal and K Gopinath — were members of the committee and were present when the report was adopted on August 12. Published records show no dissent from them. BJP sources have used that record to question why Gandhi is opposing a policy direction endorsed by the committee.
The committee’s recommendation, however, was for a tiered and sustainable revenue arrangement rather than the precise pricing structure announced. That distinction is central to the political dispute: the government is arguing that the parliamentary panel supported the principle of restoring revenue to the UPI ecosystem, while Congress is attacking the specific framework and its possible economic effects.
Under the new system, a 0.4 per cent MDR will apply from October 15 to specified person-to-merchant UPI payments above Rs 2,000, subject to a cap of Rs 300 per transaction. Person-to-person transfers will remain free, while payments to merchants up to Rs 2,000 and qualifying small-merchant transactions will continue to attract no MDR.
The Finance Ministry says about 96 per cent of person-to-merchant transactions will remain unaffected. It has also stressed that MDR is not a government tax: the payment is collected within the transaction ecosystem and distributed among participating banks, payment applications and other service providers to help fund UPI operations and expansion.
Certain categories, including essential services, will face a lower flat charge rather than the standard percentage rate. The framework also contains protections intended to prevent consumers from being directly charged the MDR, although opposition leaders have argued that merchants could ultimately factor payment costs into prices.
Gandhi’s criticism has focused both on the economic impact and on his allegation of foreign influence. In a video message, he called for the charge to be withdrawn and accused Prime Minister Narendra Modi of yielding to Washington. The Finance Ministry rejected that assertion, saying the policy was designed to create a self-sustaining, inclusive and affordable payments ecosystem.
Government functionaries have said there is no plan to reverse the decision. Their response has increasingly centred on the standing committee’s work, particularly because the panel had earlier flagged the gap between the cost of running UPI and the level of government incentives available to the industry.
The finance panel had previously warned that rapid growth in UPI transactions required a dependable revenue mechanism if banks and payment providers were to maintain investment in technology, security and acceptance. It also argued that continued reliance on budgetary incentives could place an enduring burden on the exchequer.
UPI processed about 24.5 billion transactions worth nearly Rs 29.8 trillion in August, underlining the scale of the network and the financial implications of even a limited merchant fee. The platform accounts for the overwhelming majority of digital retail payments by volume, making changes to its pricing structure politically and commercially sensitive.
