New Delhi: The Supreme Court of India on Monday issued formal notices to the Union Government, the Reserve Bank of India, and the National Payments Corporation of India on a Public Interest Litigation challenging the introduction of a Merchant Discount Rate on specified Unified Payments Interface transactions. A Bench headed by Chief Justice of India Surya Kant declined to grant an interim stay on the proposed levy, clearing the pathway for the revised fee structure to take effect on October 15.
Observing that the issue involves technical and economic mechanisms alongside legal considerations, the Bench directed the respondents to submit detailed counter-affidavits within four weeks. Appearing for the Centre, Additional Solicitor General N. Venkataraman submitted that the framework would exempt roughly 96 per cent of transactions, reiterating that the revenue is strictly an inter-entity settlement charge between banks and payment aggregators rather than a sovereign tax or fee. In response, the court stated that the executive must substantiate these operational assertions under oath.
The contested policy introduces a 0.4 per cent MDR on person-to-merchant payments exceeding Rs 2,000, capped at Rs 300 for receipts of Rs 75,000 and above. Essential utilities and thin-margin sectors, including fuel and railways, will incur a flat Rs 5 charge, while capital-market transactions carry a 0.02 per cent levy. Small merchants generating monthly receipts up to Rs 1 lakh, along with all peer-to-peer transfers, will remain under zero-MDR protection.
The petitioner, advocate Anjan Datta, contended that the tiered levy was implemented without transparent statutory consultation or published cost analyses. The plea argued that despite government assurances forbidding consumer pass-through, the additional overhead will burden low-margin trade, encourage transaction splitting, and create financial cliffs at specific thresholds. The petition further alleged constitutional discrimination under Articles 14 and 19(1)(g), pointing out that RuPay debit cards retain full fee exemptions without transaction limits while UPI payments face selective surcharges.
