'6 Crore Traders Disappointed': Trade Body Urges Nirmala Sitharaman To Roll Back UPI Charges

The Chamber of Trade and Industry (CTI) has urged the central government to reconsider upcoming UPI charge on high-value merchant payments. CTI Chairman Brijesh Goyal has written to Finance Minister Nirmala Sitharaman seeking a rollback of the Merchant Discount Rate (MDR) on UPI payments above Rs 2,000, which is scheduled to take effect from October 15, 2026.Under the new framework, eligible person-to-merchant UPI transactions above Rs 2,000 will attract an MDR of 0.4 per cent, subject to a maximum charge of Rs 300 per transaction. Payments between individuals will continue to remain free. Small merchants receiving up to Rs 1 lakh a month through UPI QR will also be exempt from the MDR. Goyal said that the government's decision has caused deep disappointment among the country's 6 crore shopkeepers, traders and entrepreneurs, and will place an additional financial burden on them.Also Read | Layoffs Are Rising In Tech, But These Skills Are Helping People Unlock Better PayCTI Fears Cash Could Make A ComebackCTI has argued that the new charge could increase the cost of accepting digital payments for a large section of traders and businesses. Goyal said the organisation is concerned that merchants may reconsider UPI for larger transactions once the MDR comes into effect.According to CTI, the impact could be significant because high-value transactions account for a much larger share of merchant payment value than their share of transaction volume. The organisation estimates that UPI payments above Rs 2,000 could see a decline of up to 50 per cent after the MDR is introduced. It also fears that some merchants and customers could return to cash for larger purchases.Why Rs 2,000 MattersThe issue is not the number of transactions alone. It is the value of those transactions. CTI, citing UPI data, said merchant payments accounted for around Rs 198 lakh crore of the roughly Rs 314 lakh crore processed through UPI in FY2025-26.The government has separately reported that UPI processed 24,162 crore transactions worth around Rs 314 lakh crore during the financial year. UPI accounted for about 85 per cent of India's digital payment volume. CTI said transactions above Rs 2,000 represented only around 4 per cent of the total number of transactions but accounted for about Rs 131 lakh crore in value. In other words, a relatively small number of high-value payments make up a large portion of merchant payment value.UPI metricFY 2025-26Total transactions24,162 croreTotal transaction valueAround Rs 314 lakh croreMerchant payments cited by CTIAround Rs 198 lakh croreValue of transactions above Rs 2,000 cited by CTIAround Rs 131 lakh croreThe scale of UPI has grown sharply over the past decade. Government data shows annual UPI transactions rising to more than 24,162 crore in FY2025-26, from just 1.78 crore in FY2016-17. What Will The MDR Mean For Merchants?At a 0.4 per cent MDR, a Rs 3,000 eligible payment would mean a charge of Rs 12. A Rs 10,000 payment would attract Rs 40, while a Rs 50,000 payment would mean Rs 200.The charge is capped at Rs 300 for transactions of Rs 75,000 and above. Importantly, the MDR is a merchant-side payment-processing charge. The government has advised banks to ensure that merchants do not pass it on to customers.GST Will Apply On MDR, Not The UPI PaymentPrabhat Ranjan, Senior Director at Nexdigm, told NDTV that GST will apply to the MDR rather than the underlying UPI payment. "For example, on a Rs 10,000 eligible UPI payment, a 0.4 per cent MDR would be Rs 40. GST at 18 per cent would apply on Rs 40-i.e., Rs 7.20-taking the merchant's total payment-processing charge to Rs 47.20, subject to applicable caps and exemptions," he said.Ranjan added that this GST is a tax on the payment-processing service and not an additional tax on the customer's purchase. For GST-registered businesses, the GST component may ordinarily be available as input tax credit, subject to the applicable conditions. Businesses that cannot claim the credit, however, could see it as an additional cost.Traders Want UPI To Remain FreeCTI has asked the Finance Ministry to reconsider the MDR decision, arguing that traders have already shifted heavily towards digital payments. The organisation said an additional cost on larger UPI transactions could make cash more attractive for some businesses.The government's new framework, however, is designed to keep the vast majority of everyday UPI transactions free. Transactions up to Rs 2,000, person-to-person payments and eligible small merchants remain outside the standard 0.4 per cent MDR framework. The real test will come after October 15, when the new system begins operating and the response of merchants and customers becomes visible.