The Supreme Court heard a challenge to reported merchant discount rates (MDR) on some UPI payments above ₹2,000 on September 28, 2026. It did not stay the reported October 15 rollout; instead, it issued notices to the Centre, the Reserve Bank of India (RBI) and the National Payments Corporation of India (NPCI), seeking responses within four weeks. The challenge remains pending, and the Court has not ruled on its merits.
What the Supreme Court did
Advocate Anjan Datta has challenged the legal basis and notifications associated with the reported MDR framework. Hindustan Times quoted Chief Justice of India Surya Kant describing the matter as: “This is less of a legal and more of a technical issue.” That reported remark is not a final ruling on whether the charge is lawful. Hindustan Times report on the hearing
As reported after the September 28 hearing, the Court declined to grant an interim stay, issued notices to the Centre, RBI and NPCI, and sought replies within four weeks. Notices invite responses; they do not decide the case. The available reporting does not establish a final judgment on the challenge. Contemporaneous report on the hearing outcome Hindustan Times report on the hearing
What the reported MDR would cover
News coverage describes a 0.4% MDR for specified person-to-merchant (P2M) UPI payments above ₹2,000, with implementation scheduled for October 15, 2026. This is a reported framework, not a rate confirmed here against the underlying September 2026 notification. The available reporting does not provide enough primary-document detail to establish every covered merchant, calculation rule, cap or exception. Report on the reported UPI MDR Report discussing the framework’s scope
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| Payment or circumstance | What reporting says |
|---|---|
| Specified P2M payment above ₹2,000 | Reported 0.4% MDR; scheduled start October 15, 2026. Exact scope should be checked against the notification. Contemporaneous coverage |
| Some specified sectors above the threshold | Some reports describe a flat ₹5 MDR for sectors including railways, telecom, insurance, fuel and agricultural inputs. Categories and calculation details require confirmation against the primary notification. Sector-rate report Report on scope and verification |
| Person-to-person (P2P) UPI transfer | The reports distinguish P2P transfers from the merchant-payment framework; they do not describe this reported MDR as a general charge on P2P transfers. Report distinguishing payment types |
Who would pay—and would consumers be charged?
MDR is described in the reports as a merchant-side charge. That is different from a fee directly imposed on a consumer for using UPI. The reporting does not establish that consumers will be charged for all UPI payments, or that every merchant payment above ₹2,000 is covered. Whether a merchant changes prices or passes on costs is a separate matter; the material available does not establish what merchants will do. Report on the reported MDR and its incidence
The practical distinction is the payment type: a purchase made to a merchant is P2M, while a transfer to another person is P2P. The reported threshold and rates concern specified merchant payments, not UPI use in general. The exact merchant and transaction eligibility remains dependent on the primary instruments. Report distinguishing payment types Report discussing scope
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How this differs from earlier zero-MDR policy
Earlier policy context helps explain why the reported framework has drawn attention, but it does not determine the legal challenge or establish the 2026 rules. A March 2025 government document described an incentive scheme that maintained zero MDR while varying incentives by merchant size and transaction amount: small merchants had zero MDR and a 0.15% incentive up to ₹2,000, and zero MDR without an incentive above ₹2,000; large merchants had zero MDR regardless of amount and no incentive. Those terms describe the earlier scheme, not the reported 2026 framework. Press Information Bureau document on the 2025 UPI incentive scheme
The GST Council’s April 2025 newsletter said claims that the government was considering GST on UPI transactions above ₹2,000 were false. It also described the January 2020 removal of MDR on P2M UPI. A possible GST treatment of an MDR charge is not the same question as imposing a tax on the underlying UPI transaction. GST Council newsletter, April 2025
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What is still unresolved
- The legal basis: Datta’s plea challenges the basis for the reported charge; the Court has not yet decided that question on the merits. Report on the plea
- The exact scope: The reported rates, sector categories, threshold application and any caps or exceptions need to be checked against the September 2026 notifications. Report noting scope details
- The next court step: The Court sought responses within four weeks of the reported September 28 hearing. The cited reporting describes no interim stay, not a final resolution. Report on the hearing outcome
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