Central Government defends decision to impose MDR charges on UPI

The Central Government has presented its position before the Supreme Court regarding the proposal to impose Merchant Discount Rate (MDR) charges on transactions exceeding ₹2,000 made via Unified Payments Interface (UPI). During the hearing on Thursday, the government defended the decision, clarifying that merchants were never assured that the UPI payment facility would be available without any charges forever.

According to a report by Amar Ujala, the Central Government stated in its response filed in the Supreme Court that this new MDR arrangement passes the constitutional test of equality under Article 14 of the Constitution. According to the government, this MDR structure has been designed with the objective of ensuring financial inclusion, affordable digital payments, and the long-term stability of the country's digital payment ecosystem.

The government further clarified in its response that the revised MDR arrangement had been under consideration for a long time. This final structure was prepared only after consultations with various stakeholders. The government emphasized in its affidavit that no specific assurance was given to merchants that the zero MDR regime would continue indefinitely. Additionally, the subsidy provided by the government was not a mandatory obligation but depended on the government's discretion.

The entire matter reached the Supreme Court as a result of a Public Interest Litigation (PIL) filed by advocate Anjan Datta. The petition challenges the revised MDR arrangement. The petitioner has alleged that this new system violates the fundamental rights guaranteed under Article 14 and Article 19(1)(g) of the Constitution. It is argued in the petition that imposing this charge is not legally justified and affects business rights.

In the documents submitted to the court, the Central Government stated that such reforms are inevitable to bring sustainability to the digital payment ecosystem. The government believes that if payment providers do not receive adequate compensation, the efficiency of the system could be affected in the long run. Therefore, the decision to impose MDR charges on transactions above ₹2,000 was taken to make the digital transaction structure stronger and more stable.

The Supreme Court is currently considering the government's response and the petitioner's arguments. The government's stance makes it clear that it intends to move from a free model of digital payments toward a systematic charge-based model to recover technological infrastructure costs and maintain the quality of services.