UPI Charges Above Rs 2,000: NPCI Tells Court Merchants Cannot Pass On
Shoppers paying shopkeepers by UPI should not see a surcharge at the counter, NPCI says, while the Supreme Court weighs the challenge to the new charge.
Image: UPI logo / Wikimedia Commons
The National Payments Corporation of India (NPCI) has told the Supreme Court that merchants may not pass the new UPI merchant discount rate (MDR) on to customers, and that the charge applies to only about 4 per cent of person-to-merchant payments, those above Rs 2,000. NPCI made the points in a counter affidavit filed on 3 November in Anjan Datta v. Union of India, a writ petition challenging the charge, LiveLaw reported on 5 November 2026.
No Surcharge at the Shop Counter
NPCI said merchants are barred from recovering MDR from customers and that breaking the rule can lead to action, including termination of UPI membership. It said person-to-person transfers and small-merchant payments stay free, and that about 96 per cent of person-to-merchant transactions are not affected. The framework was first due to start on 15 October and has since been postponed.
What NPCI Argued Against the Petition
The petition challenges an amendment to Section 10A of the Payment and Settlement Systems Act, 2007, made through the Taxation and Other Laws (Amendment) Act, 2026, along with a Finance Ministry notification and the revised MDR framework announced in September. NPCI argued that it is not a “State” under Article 12, so a writ under Article 32 does not lie against it. It said RBI authorised it to run UPI in 2016, that MDR is a commercial charge and not a tax, and that the classification does not violate Articles 14 or 19(1)(g).
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On cost, NPCI cited a parliamentary committee finding that the Rs 2,000 crore budget allocation covered 11 per cent of industry costs, and a Finance Ministry estimate of Rs 20,700 crore in operating costs. It also pointed to a fund, financed by 5 per cent of each entity’s MDR share, meant to help merchants with turnover up to Rs 20 lakh adopt UPI.
Court Has Not Stayed the Charge
In September the Court sought an affidavit on the basis for the charge, according to reports at the time. LiveLaw’s report does not give the next hearing date. IPB’s earlier explainer on who pays and who is exempt sets out how the charge works, and more court coverage is under the Supreme Court tag.
Source: Based on reporting by LiveLaw and Bar & Bench.
Image: UPI logo / Wikimedia Commons.
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