Finance Ministry Clarifies That UPI Transactions will not be charged!

The central government has clarified its position in response to rumours that it could impose additional taxes on UPI payments. In a series of tweets published on Sunday, the Ministry of Finance claimed that UPI is a “digital public utility” and that there are no intentions to charge for its services. According to the tweet, the government has financially supported the country’s digital payments ecosystem. It also noted that alternative funding mechanisms must be explored to meet the expense of recovery. The ministry went on to state that it has also made plans to offer support this year to encourage more people to adopt electronic payments.

In response to rumors that UPI transactions might be charged an additional cost to support the payments infrastructure, the remark was made. The Reserve Bank of India has also asked for comments on the topic, according to a discussion paper released on August 17th. Although it wasn’t particularly addressing UPI transactions, the document covered a number of electronic payment systems, including Immediate Payment Service (IMPS), the National Electronic Funds Transfer (NEFT) system, and the Real Time Gross Settlement (RTGS) system. The report demanded that the government maintain the zero-MDR (merchant discount rate) policy, which is still in place for RuPay and UPI transactions. Service providers assert that systems can be improved by tying an MDR fee to digital payments.

The Payments Council of India (PCI), the trade group for the country’s digital payments ecosystem, requested in writing to the government that the zero-MDR policy for UPI and Rupay debit cards be reversed before the introduction of the Union Budget 2022. MDR (0.4 to 0.9%) is currently assessed on Visa and Mastercard debit cards, and it is divided between the issuer banks and acquirer. In its paper on UPI, the RBI asked for feedback on whether it should be treated differently from debit cards from Visa and Mastercard. The administration declared in the tweet that it is in favour of “economical and user-friendly” digital payments.