Congress, BJP clash over 0.4% UPI charge on merchant payments

The Centre has introduced a 0.4% Merchant Discount Rate on UPI merchant payments above ₹2,000 from October 15, capped at ₹300 for payments of ₹75,000 and above. Person-to-person transfers and payments up to ₹2,000 remain free, with merchants bearing the charge. Rahul Gandhi said the move breaks the free-UPI promise and reflects surrender to American pressure. Kharge said "the Modi government's loot has now reached UPI". The BJP accused Congress of spreading fake news, saying individual transactions attract no charge.

Written by AI from Hindustan Times — India · not yet reviewed by an editor · Published 16 Sept 2026, 9:12 am IST

Source

Hindustan Times — India · read the original report ↗

#upi#mdr#congress#bjp#digital payments

Desk check · compared with the source

What the desk checked (5)

A 0.4% fee applies on UPI merchant payments above ₹2,000 from October 15, capped at ₹300 for payments of ₹75,000 and above. — Figure appears in source, attributed to a government notification and announcement; source states person-to-person transfers and payments up to ₹2,000 remain free.
Rahul Gandhi said the move breaks the promise of free UPI and amounts to 'surrendering to American pressure'. — Directly attributed to Rahul Gandhi, including a post in Hindi on X.
Mallikarjun Kharge said 'The Modi government's loot has now reached UPI' and alleged a 'Digital Payments Tax'; he put wholesale inflation near 10%. — Attributed to Kharge's statement and X post; the inflation figure is his claim, with no official data cited in the source.
BJP spokesperson Pradeep Bhandari said 96% of UPI merchant transactions are ₹2,000 or below and fully charge-free. — Attributed to Bhandari; underlying data source not named in the article.
Rahul Gandhi said transactions above ₹2,000 are about 5% of volume but nearly 65% of UPI's total transaction value. — Attributed to Gandhi's X post; no supporting data source given.

Written by AI from Hindustan Times — India · not yet reviewed by an editor · How we use AI · Report an error

Analysts’ view opinion

AI Political Analyst

This looks like a payments-policy dispute, but it is really a battle over political framing. The Congress is compressing a technical MDR decision into a single slogan — "Modi Tax", a "Digital Payments Tax" — to fold it into its existing inflation-and-loot narrative, while the BJP is pushing back hard with numbers, insisting person-to-person transfers are untouched and 96% of merchant transactions stay free. The real political exposure is that the cost falls on small traders and shopkeepers, a constituency the BJP has long counted as core support.

Congress's strategy is straightforward: turn a complex merchant-fee decision into one memorable phrase and attach it to the cost-of-living argument it is already running.
By linking the move to trade talks with Washington, Rahul Gandhi is attempting to upgrade an economic complaint into a sharper charge of yielding on national interest.
The BJP's response is aggressive rather than defensive, because the party is protecting Digital India — one of its own signature achievement narratives.
Each side is choosing the metric that suits it: the BJP cites transaction volume (96% free), the Congress cites transaction value (5% of transactions, about 65% of value) — a framing contest more than a factual one.
Whether merchants visibly pass the cost on is the decisive political variable; if consumers feel it, Congress's charge sticks, if they do not, the issue fades.

What to watch — Watch how small-trader and shopkeeper associations react after October 15 — audible discontent from that base would put real pressure on the government to clarify or soften the thresholds.

The story does not establish how much the MDR will actually affect prices, nor does it substantiate the claim of American pressure — those remain Congress's political assertions rather than verified facts.

Deep dive

Research brief · 8 facts · 4 dates · exam-ready

The brief

Context

The Unified Payments Interface (UPI) has so far operated on a zero-Merchant Discount Rate (MDR) basis, meaning neither customers nor shopkeepers paid a fee on UPI payments. A government notification issued on Monday paved the way for an MDR charge on UPI transactions above ₹2,000, and on Tuesday evening the government introduced a 0.4% fee on such merchant payments from October 15, capped at ₹300 for payments of ₹75,000 and above. Person-to-person transfers and payments up to ₹2,000 remain free, with merchants bearing the charge. The Congress called it a broken promise and a "Modi Tax"; the BJP called the charge-related claims "fake news".

Key facts

A 0.4% transaction fee (MDR) will apply on UPI merchant payments above ₹2,000 from October 15.
The charge is capped at ₹300 for payments of ₹75,000 and above.
Person-to-person (P2P) transfers and payments up to ₹2,000 remain fully free; merchants bear the charge.
The enabling notification was issued on Monday; the government announced the 0.4% fee on Tuesday evening.
BJP spokesperson Pradeep Bhandari said 96% of UPI merchant (P2M) transactions are ₹2,000 or below and are 100% charge-free.
Rahul Gandhi said transactions above ₹2,000 are about 5% of volume but nearly 65% of UPI's total transaction value.
Kharge said wholesale inflation is near 10% and called the move a 'Digital Payments Tax'.
Congress's Pawan Khera said the 0.4% MDR should be called the 'Modi Tax'.

Timeline

Monday (day before the Congress attack)Government notification issued, paving the way for an MDR charge on UPI transactions above ₹2,000.
TuesdayCongress accuses the government of breaking its promise of keeping UPI free of fees; Rahul Gandhi and Mallikarjun Kharge attack the move.
Tuesday eveningGovernment introduces a 0.4% transaction fee on merchant payments above ₹2,000, capped at ₹300 for payments of ₹75,000 and above, while ring-fencing P2P transfers.
October 15New framework takes effect.

Who has a stake

Merchants accepting UPI (P2M) — Bear the 0.4% MDR on payments above ₹2,000, capped at ₹300; may pass costs into prices.
Consumers — Not billed directly, but Congress argues the merchant fee will be added to prices and come out of customers' pockets.
Union government / Centre — Defends the shift from zero-MDR; accused of breaking its free-UPI promise and of yielding to US pressure.
Congress (Rahul Gandhi, Mallikarjun Kharge, Jairam Ramesh, Pawan Khera) — Frames the charge as a 'Modi Tax'/'Digital Payments Tax' and evidence of poor policy sequencing.
BJP (spokesperson Pradeep Bhandari) — Rejects Congress claims as 'fake news' meant to create panic and derail Digital India; stresses no charge on individual transactions.
NPCI — Cited as saying the zero-fee era had to end (per linked reporting).
United States / trade negotiators — Rahul Gandhi says Washington has pushed against India's zero-MDR policy for years, linking the move to trade talks.

Why it matters

UPI's zero-fee design is central to India's mass adoption of digital payments, so introducing an MDR marks a structural shift in how the system is funded. Because larger-value transactions carry most of UPI's value, even a narrow 0.4% charge touches a big share of money moving through the network, raising the question of whether merchants absorb the cost or pass it to consumers. The dispute also folds into a wider political contest over inflation, Digital India and India's negotiating space with the United States.

UPSC angle

Prelims pointers

MDR (Merchant Discount Rate): fee a merchant pays on accepting a digital payment; UPI had a zero-MDR regime so far.
New UPI MDR: 0.4% on merchant payments above ₹2,000, effective October 15, capped at ₹300 for payments of ₹75,000 and above.
P2P transfers and UPI merchant payments up to ₹2,000 remain charge-free; merchants, not customers, are billed.
BJP claim: 96% of UPI P2M transactions are ₹2,000 or below.
Rahul Gandhi's claim: above-₹2,000 transactions are ~5% of volume but ~65% of UPI transaction value.
NPCI is the body associated with UPI; it has said the zero-fee era had to end.

Mains framing

The reintroduction of a Merchant Discount Rate on high-value UPI payments reopens the core question of who pays for a public digital payments utility that was built on a zero-fee promise. The government's design tries to protect mass usage — person-to-person transfers and payments up to ₹2,000 are exempt, and the BJP notes that 96% of merchant transactions fall in that band — while shifting a 0.4% cost, capped at ₹300, onto merchants for larger payments. Critics counter that the exempt band covers volume but not value: by Rahul Gandhi's figures, the taxed slice is about 5% of transactions but nearly 65% of total value, so the incidence is large, and merchant costs can be passed to consumers at a time Kharge says wholesale inflation is near 10%. A second strand of criticism is procedural and geopolitical — Jairam Ramesh's "First Announce, Subsequently Think" jibe about the sequence of the notification and the announcement, and the allegation that the change responds to long-standing US pressure against zero-MDR during trade negotiations. A credible way forward, on the source's own terms, lies in transparency about how the revenue sustains the payments network (NPCI has said the zero-fee era had to end), clarity that individuals face no charge, and monitoring of whether small and mid-sized merchants either absorb the fee or shift back to cash.

Key terms

UPI (Unified Payments Interface): India's instant retail payments system, referred to in the source as United Payment Interface, so far free of transaction fees.
MDR (Merchant Discount Rate): The fee levied on a merchant for accepting a digital payment; now set at 0.4% for UPI merchant payments above ₹2,000.
Zero-MDR policy: The earlier regime under which UPI transactions attracted no merchant fee; Rahul Gandhi says the US pushed against it for years.
P2M and P2P transactions: Person-to-merchant and person-to-person payments; only P2M payments above ₹2,000 attract the new charge.
NPCI: The organisation behind UPI, cited in the source as saying the zero-fee era had to end.
'Modi Tax' / 'Digital Payments Tax': Congress labels for the 0.4% MDR, used by Pawan Khera and Mallikarjun Kharge respectively.

Practice questions

Critically examine the implications of introducing a Merchant Discount Rate on high-value UPI transactions for India's digital payments ecosystem and for small merchants.
'A charge that covers only 5% of transactions but 65% of transaction value is not a small charge.' Discuss this argument in the context of the new 0.4% UPI MDR.
Should a public digital payments utility like UPI be funded by user or merchant fees, or by the exchequer? Discuss with reference to the October 15 framework.

Grounded only in the source report — figures and dates are the source's, not inferred.

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