NEW DELHI: Govt on Thursday said the merchant discount rate (MDR) on UPI payments should be treated the same way as plastic payments, which are not passed on to consumers and will ask the Indian Bank Association (IBA) to ensure that merchants don’t burden customers once the new regime kicks in next month. Govt is also hopeful that goods and services tax (GST) council will review the 18% tax levied on MDR on UPI and will take a “favourable” view as it affects common people.The maximum retail price (MRP) of a product stays the same whether paid by debit card, UPI or credit card and merchants have always absorbed that MDR within MRP, a senior finance ministry official said.All person-to-person UPI payments remain free, irrespective of the amount and all UPI merchant payments up to Rs 2,000 have no MDR levied. RuPay debit card transactions also continue to have zero MDR. “Why should UPI be treated any differently? Govt is not going to get a single rupee. It is not a cess or surcharge, neither a tax. The whole MDR amount will remain within the payment ecosystem and will be shared among banks and other entities,” the official added.Though no advisory has yet been given to IBA, govt will be holding talks with the association to ensure that a mechanism is in place to not burden the consumer. “IBA needs to hold awareness campaigns and outreach programmes, preferably in regional and local languages,” the official said.The official added that MDR is not unique to India and payment systems globally levy 1.5-3% charge on credit cards and UPI systems. “The cost of running the entire ecosystem may still not be recovered by this. NPCI may still have to depend on govt support,” the official said.Backing the decision, the official said MDR is being levied on select high-value transactions to make India’s indigenous UPI ecosystem financially sustainable over long-term. This will help fund servers, payment infrastructure, cybersecurity, fraud detection and improve and expand UPI to feature phones as well. “There are nearly 56 crore UPI users, leaving substantial room for expansion, especially in rural and semi-urban areas,” the official said.Fears around the increase in cash usage after the rollout are also misplaced and govt is ready to engage with trader bodies as well. “The aim is to create awareness at all levels,” the official added.
