Supreme Court Won't Halt UPI Merchant Charges, Seeks Centre's Reasoning

The Supreme Court on Monday declined to put on hold the Centre's move to levy charges on Unified Payments Interface person-to-merchant transactions exceeding Rs 2,000, while asking the government to explain the rationale behind the decision.

A bench comprising Chief Justice of India Surya Kant and Justices Joymalya Bagchi and V Mohana directed the Centre, the Reserve Bank of India and other parties to submit their counter affidavits within four weeks. The court also sought an affidavit from the Centre setting out the basis for the decision.

During the hearing, Additional Solicitor General N Venkataraman, appearing for the Centre, submitted that 96 per cent of those using the payment gateway were exempt from the charge. The bench observed that the matter was "less a legal and more a technical issue."

The new framework, introduced earlier this month, ends nearly six years of fully free UPI payments. It imposes a 0.4 per cent fee on transfers above Rs 2,000 made to merchants through the platform from October 15, while ring-fencing person-to-person transactions and small payments from any charge.

Under the structure, the fee is to be borne by merchants rather than consumers and is capped at Rs 300 for transactions of Rs 75,000 or more. Person-to-person UPI transfers and merchant transactions of up to Rs 2,000 will remain free.

Essential and thin-margin sectors, including railways, telecom, insurance, fuel and agricultural inputs, will pay a flat merchant discount rate of Rs 5 per transaction above Rs 2,000. Payments into mutual funds and securities, and those routed through stockbrokers and dealers, will attract a merchant discount rate of 0.02 per cent, also capped at Rs 300.

The National Payments Corporation of India, which operates the UPI network introduced in 2016, has said the revenue generated will support investment in infrastructure resilience, cybersecurity, fraud prevention, innovation and customer service.