Finance
On Monday, Parliament approved the Taxation and Other Laws (Amendment) Bill, with Finance Minister Nirmala Sitharaman emphasizing that the legislation imposes no tax or transaction fee on customers who pay using the Unified Payments Interface (UPI).
The Bill, which was passed by the Lok Sabha last week, was returned by the Rajya Sabha with a voice vote following a brief discussion and response from the Finance Minister.
Speaking on the floor of the Upper House, the Finance Minister stated that the proposed revision to Section 10A of the Payment and Settlement Systems Act is just an enabling measure and does not impose a Merchant Discount Rate (MDR) on customers at this time.
“The enabling provision we are bringing in does not impose any tax or transaction charge on UPI users,” Sitharaman said.
The Finance Minister further stated that after the approval of the Parliament, the UPI and Services Steering Committee of the National Payments Corporation of India (NPCI) will consider whether an MDR charge should be introduced.
“So, no MDR framework has been finalised,” she clarified.
The clarification comes as there is growing speculation that a transaction fee may be imposed for UPI payments as a result of the government’s proposed revisions.
The Finance Ministry issued a statement on Saturday clarifying that person-to-person UPI transactions will remain free under the new proposal.
The government stated that if MDR is implemented, it will only apply to a limited range of merchant transactions that exceed a specified threshold and will be taxed at a minimal rate. The rate, it stated, would be much lower than the MDR for debit and credit card transactions.
“Most transactions will remain free of charge for merchants on UPI,” the ministry said.
According to government officials, more than 90% of transactions, including daily purchases of milk, vegetables, and groceries, will be free of MDR charges.
The government also stated that any MDR tax, if implemented, would be threshold-based on high-value transactions rather than levied on all UPI transactions.
The government stated that UPI was implemented in 2016 and has been free of charge for merchants and citizens since January 2020. It also emphasized India’s success in making UPI the world’s largest real-time interoperable payment system.
Source: IANS
