New Delhi [India], September 16 : A fierce political tug-of-war has erupted over the revised Unified Payments Interface (UPI) Merchant Discount Rate (MDR) framework, drawing a sharp contrast between the ruling dispensation and the Opposition.
While the Central government maintains that digital payments remain entirely free for citizens, warning that imposing merchant costs onto consumers is illegal and a criminal offence, the Congress-led Opposition has termed the move a "betrayal" and a "UPI tax," alleging that the Modi administration has capitulated to American pressure to benefit foreign payment corporations.
Reassuring consumers amid raging debates over digital transaction charges, Union Minister for Communications Jyotiraditya M Scindia on Wednesday made it clear that any attempt by merchants to impose the costs of the Merchant Discount Rate (MDR) on transactions done through Unified Payments Interface (UPI) to customers would violate the law and constitute a criminal offence.
Addressing queries regarding concerns that merchants might transfer a 0.4 per cent MDR transaction fee onto end-users, Scindia emphasised that the government has neither recommended nor permitted any such levy on citizens.
"There is no recommendation to levy this on the customer. Doing so would violate the law and amount to a criminal offence," the Union Minister told ANI.
Reiterating the Centre's commitment to safeguarding the interests of the common public, Scindia said that consumers would remain completely insulated from transaction costs on digital payments.
"This will never be imposed on the customer or the common man. You cannot impose this on our consumer," he affirmed.
The Union Minister's comments come shortly after the Leader of the Opposition in the Lok Sabha, Rahul Gandhi, alleged that Prime Minister Narendra Modi has "lied down due to American pressure" and imposed a "tax" on UPI.
In a video message posted on X, Rahul Gandhi said, "Indira ji was once asked whether she leans left or right, and her response was, 'I don't lean left, I don't lean right, I stand straight.' Modi ji has a completely different concept. He's neither left nor right; he has decided to lie down straight and prostrate himself in front of Donald Trump. He's put a tax on every single Indian person by taxing UPI and giving a huge amount of money to the United States. Modi ji, please stop lying down in front of the United States. Have a spine, stand up and take back the UPI tax."
Targeting the Centre over the digital transaction policies and Merchant Discount Rate (MDR) issues, Congress President Mallikarjun Kharge termed it a sign of "meekness."
"Yesterday's surrender on the MDR on UPI is another stark example of your govt's meekness! From tariffs and trade to H-1B immigration, visas and digital payments, the pressure from Washington keeps mounting, and you, 'Howdy Modi ji' keeps surrendering!" the Congress president added.
Earlier in the day, senior Congress leader Jairam Ramesh also launched a sharp attack on Prime Minister Narendra Modi over his administration's economic and diplomatic posture toward the United States, redefining the acronym NOTA as "Narendra's Ongoing Trump Appeasement" and alleging that the Centre has capitulated to American pressure by ending zero-MDR on Unified Payments Interface (UPI) transactions.
Taking to social media platform X, the Rajya Sabha MP flagged that the United States is advancing legislation that imposes steep trade penalties on Indian exports while simultaneously tightening visa regulations for Indian tech professionals.
"Tomorrow, the US House of Representatives votes on a Bill that introduces 100% tariffs on India. The US Senate has already approved this draconian law. Meanwhile, the Trump regime has been cracking down on Indian immigrants and making tougher laws against them. H-1B visa costs have been increased, and such holders could soon be deported immediately when out of a job. Such holders are mostly IT professionals," Ramesh said.
The Congress leader alleged that instead of countering Washington's aggressive trade measures, the Union government has succumbed to US demands by removing the zero Merchant Discount Rate (MDR) regime for UPI transactions to benefit American card networks.
"Here, the Modi Govt has given into a US demand to get rid of zero MDR and charge for UPI. The U.S. Trade Representative earlier this year criticised UPI for being free and having driven out Visa and Mastercard," Ramesh wrote.
Joining the offensive, Congress General Secretary and MP Randeep Singh Surjewala said that September 14 will be remembered as a "day of digital somersault," alleging that the Centre's decision to permit charges on UPI transactions exceeding Rs 2,000 constitutes a "betrayal" of ordinary citizens.
Addressing a press conference in Bengaluru, Surjewala criticised the Modi government over the proposed UPI transaction tax, alleging that the move will benefit American companies while putting the financial burden on the common person.
"This is an issue of utmost importance, impacting the lives and livelihoods of every common person. We are here to point out three things. Modi's government imposing a UPI transaction tax is a betrayal of the people of India. American companies will profit here, ordinary Indians will pay, and the BJP government has surrendered," he said.
The Congress General Secretary added, "September 14, 2026, will be remembered as a day of digital somersault, as well as a day of betrayal and surrender by the Union BJP government, as it has opened the doors for imposing a UPI transaction tax on UPI transactions above Rupees 2,000 with effect from October 15, 2026."
Meanwhile, the Centre has clarified that MDR is neither a tax nor a charge collected by the government, but is distributed among payment ecosystem participants, including banks and payment application providers, to support the operation and continued expansion of the UPI ecosystem.
The National Payments Corporation of India (NPCI) on Tuesday introduced a new Merchant Discount Rate (MDR) framework, under which UPI merchant transactions above Rs 2,000 will attract an MDR of 0.4 per cent, while consumers will continue to transact free of cost using UPI.
The revised UPI MDR framework will come into effect from October 15, 2026, and will apply only to select merchant transactions.
Under the new framework, an MDR of 0.4 per cent will apply to Person-to-Merchant (P2M) UPI transactions above Rs 2,000, with the MDR capped at Rs 300 per transaction.
The government has reiterated that the new UPI framework has no impact on any person-to-person (P2P) transactions. It affirmed that UPI will continue to remain completely free for all person-to-person transfers, irrespective of the amount transferred, adding that approximately 96 per cent of all P2M transactions will remain unaffected as MDR will strictly apply only to specified merchant transactions above Rs 2,000.