Retailers across India are planning a nationwide protest on 2 October in opposition to the government’s plan to impose a 0.4% fee on high-value UPI transactions, risking wider impacts on margins and consumer behaviour.
Indian retailers are preparing for a nationwide protest on 2 October as the row over the government’s planned merchant discount rate on UPI payments escalates. The new framework would impose a 0.4% charge on person-to-merchant transactions above ₹2,000, with a cap of ₹300, ending the zero-fee regime that has applied since 2020. Retail groups say the change could squeeze already narrow margins, particularly for mobile phone sellers, fast-moving consumer goods distributors and other businesses that rely on high volumes and quick turnover.
Industry associations argue that the levy could trigger wider damage than the government anticipates, including higher operating costs, pressure on working capital and, in some cases, higher prices for shoppers. The Economic Times reported that some trade bodies fear merchants will either pass the charge on to customers or steer them towards cash payments, while Mint reported that the National Payments Corporation of India has rejected speculation that the fee would create extra goods and services tax liabilities for small traders.
The dispute has also moved into the courts. Business Standard reported that a public interest petition has challenged the legality of the new UPI charge in the Supreme Court, while the court itself has declined to grant an immediate stay on the rollout. According to reports, the bench described the issue as more technical than legal and asked the Centre whether the levy should be treated as a tax, fee or commercial charge, issuing notices to the government, the Reserve Bank of India and NPCI.
For the payments industry, however, the reintroduction of MDR is being framed as a funding mechanism for a digital payments ecosystem that still carries substantial costs. Mint reported that Finance Minister Nirmala Sitharaman has said the fee would be split among banks, payment gateways, UPI apps and sponsoring banks, reflecting a broader push to keep the infrastructure commercially sustainable. Retailers, by contrast, say the policy risks undermining the very adoption that made UPI a daily payment habit for millions of Indians.
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