New Delhi: Finance Minister Nirmala Sitharaman has clarified that the Taxation and Other Laws (Amendment) Bill does not impose any tax or transaction charge on users making payments through the Unified Payments Interface (UPI).
The legislation, which was passed by the Lok Sabha last week, was returned by the Rajya Sabha on Monday after a brief discussion and the Finance Minister’s reply.
Addressing the Rajya Sabha, Sitharaman said the proposed amendment to Section 10A of the Payment and Settlement Systems Act is only an enabling provision. It does not currently introduce a Merchant Discount Rate (MDR) charge on UPI users.
She said the UPI and Services Steering Committee of the National Payments Corporation of India (NPCI) will decide whether an MDR framework should be introduced after Parliament approves the amendment. “No MDR framework has been finalised,” she clarified.
The clarification follows speculation that the proposed amendment could lead to transaction charges on UPI payments.
The Finance Ministry has also clarified that person-to-person UPI transactions will continue to remain free under the proposed changes. If MDR is introduced in the future, it would apply only to a limited category of merchant transactions above a specified threshold and would be charged at a nominal rate.
According to the government, the proposed rate would be significantly lower than MDR applicable to debit and credit card transactions. Most UPI merchant transactions would continue to remain free.
Government officials said more than 90 per cent of everyday transactions, including payments for milk, vegetables and groceries, would not attract MDR even if such a framework is introduced.
The government further clarified that any future MDR would be threshold-based and targeted at high-value merchant transactions rather than being imposed on all UPI payments.
UPI was launched in 2016 and has remained free for merchants and citizens since January 2020. The government has highlighted UPI’s rapid growth and India’s achievement in developing it into the world’s largest real-time interoperable digital payment system.
