The Supreme Court has declined to grant an interim stay on the Centre’s new merchant discount rate framework for specified Unified Payments Interface transactions. The framework is scheduled to take effect on October 15 and introduces a 0.4% MDR on qualifying person-to-merchant UPI payments above ₹2,000.
A bench comprising Chief Justice of India Surya Kant and Justices Joymalya Bagchi and V Mohana issued notices to the Union government, the Reserve Bank of India, the National Payments Corporation of India and other respondents. The proceeding arose from a writ petition filed by advocate Anjan Datta challenging Finance Ministry notifications issued on September 14 and 15.
The petition seeks to quash the decision permitting MDR on the covered transactions. It argues that the framework was introduced without sufficient statutory safeguards, transparency or public consultation. The court has not ruled on those arguments. Its refusal to issue an interim stay means the implementation timetable remains unchanged while the respondents prepare their formal replies.
Under the notified framework, general person-to-merchant UPI transactions exceeding ₹2,000 will attract MDR of 0.4%. The charge is capped at ₹300 for transactions valued at ₹75,000 or more. Person-to-person transfers and merchant payments of up to ₹2,000 will remain free.
The framework also provides an exemption for small merchants receiving up to ₹1 lakh per month through UPI QR codes into their bank accounts. The government has said the structure is intended to support the operating sustainability of the digital-payments ecosystem while leaving most routine UPI transactions outside the charge.
Representing the Centre, Additional Solicitor General N Venkataraman told the court that approximately 96% of transactions routed through payment gateways would remain exempt. He also said MDR for essential services would be capped at ₹5 and characterised the levy as neither a tax nor a government fee. The Chief Justice asked the Centre to place the relevant details on affidavit.
Justice Bagchi raised questions concerning the legal character of the charge and the executive’s authority to impose it. Those observations were made during the preliminary hearing and do not constitute a final determination of the petition.
The MDR is ordinarily paid by the merchant to entities participating in payment processing rather than being directly deducted as a separate charge from the customer’s transferred amount. The commercial treatment of that cost will depend on the applicable framework, merchant arrangements and enforcement provisions.
Banks, payment applications, payment gateways and merchants now have a limited implementation window before October 15, although the legal challenge remains pending. The respondents’ affidavits are expected to clarify the statutory basis, transaction categories, exemptions and distribution of the charge across the UPI ecosystem.
