The Supreme Court on September 28 sought an affidavit from the Union Government explaining the legal and technical basis for introducing Merchant Discount Rate (MDR) on specified UPI merchant transactions above ₹2,000. The Bench, however, declined to stay the proposed framework at this stage.
The PIL, filed by advocate Anjan Datta, challenges the Centre’s September 14 notification and the subsequent MDR framework. The new system is scheduled to take effect from October 15, 2026. Under it, a 0.4% MDR would apply to specified person-to-merchant UPI payments above ₹2,000, subject to a ₹300 ceiling for transactions of ₹75,000 or more. Person-to-person transactions remain outside the charge, while specified small merchants and sectors have separate protections.
The petitioner has questioned the basis for the ₹2,000 threshold and argued that the additional cost could ultimately affect merchants and consumers.
A Bench comprising Chief Justice of India Surya Kant and Justices Joymalya Bagchi and V. Mohana sought clarification from the Centre regarding the nature and legal basis of the MDR.
During the hearing, Justice Bagchi questioned the source of the legal authority for the charge, asking,
“Is it tax or a fee? If not a fee, what is the executive basis for making this expropriation? What is the service?”
Additional Solicitor General N. Venkataraman submitted that the MDR was neither a tax nor a government fee and represented a settlement charge within the payment ecosystem.
The Supreme Court directed the Union Government to place the relevant facts and basis of the framework on affidavit.
The Bench also declined the petitioner’s request for an interim stay, allowing the proposed framework to proceed pending further consideration.
