The Supreme Court has already heard a plea challenging the legal basis for a reported merchant discount rate (MDR) on some UPI merchant payments above ₹2,000. On September 28, 2026, the Court reportedly declined to pause the planned October 15 rollout, issued notices to the Centre, the Reserve Bank of India (RBI) and the National Payments Corporation of India (NPCI), and sought responses within four weeks. That is an interim procedural outcome—not a final ruling on whether the framework is lawful.
What the Supreme Court did
The plea was filed by advocate Anjan Datta and challenges the legal basis and notifications associated with the reported MDR framework. Hindustan Times reported that Chief Justice of India Surya Kant described the issue as: “This is less of a legal and more of a technical issue.” The Court reportedly sought clarity on the charge’s legal and technical basis and who bears it. Hindustan Times’ report on the hearing
As of October 4, 2026, the reported position is that the Court did not grant an interim stay, issued notices and allowed four weeks for responses. It has not yet decided the challenge on its merits. Bar & Bench’s contemporaneous coverage
What the reported MDR would apply to
News reports describe a 0.4% MDR for specified person-to-merchant (P2M) UPI payments above ₹2,000, with implementation scheduled for October 15, 2026. They also report a flat ₹5 rate for transactions above the threshold in certain sectors, including railways, telecom, insurance, fuel and agricultural inputs. These are reported framework terms, not a verified reading of the primary September 2026 notification; exact eligible categories, thresholds, caps and calculation should therefore be confirmed against the official instruments. Mint’s report on the rates and planned start
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The distinction between payment types matters. P2M means a customer pays a business; person-to-person (P2P) transfers are payments between individuals. The reports concern specified merchant payments, not a blanket charge on every UPI transfer.
Who would pay—and will UPI remain free for consumers?
MDR is described in the reporting as a merchant-side charge, rather than a general fee charged to consumers for using UPI. The available reports do not establish whether, or how, individual merchants might reflect their costs in prices. They also do not establish that every business, payment above ₹2,000 or UPI user falls within the reported framework.
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For consumers, the practical answer from the reported terms is that this is not a general fee on UPI use: the described charge concerns specified P2M transactions and is assigned to merchants. Whether the framework proceeds as scheduled, and its exact scope, remain subject to the primary notifications and the pending court challenge.
How this differs from earlier zero-MDR policy
In March 2025, the government described an incentive scheme that maintained zero MDR while varying incentives by merchant size and transaction value. Under that earlier scheme, small merchants had zero MDR up to ₹2,000 with a 0.15% incentive, and zero MDR without an incentive above ₹2,000; large merchants had zero MDR regardless of amount and no incentive. Those arrangements explain the prior policy context, but do not establish the terms of the reported 2026 framework or decide the legal challenge. Press Information Bureau, March 2025
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A separate issue is GST. The GST Council’s April 2025 newsletter said claims that the government was considering GST on UPI transactions above ₹2,000 were false, and noted the January 2020 removal of MDR on P2M UPI. A possible GST treatment of an MDR charge is not the same as a tax on the underlying UPI transaction. GST Council newsletter, April 2025
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What remains unresolved
- The September 2026 notifications’ exact wording and the precise merchant, sector, threshold and cap rules.
- The legal and technical basis for applying the reported charge.
- The outcome of the Supreme Court challenge after the respondents submit their replies.
Those points matter more than broad claims that UPI is becoming paid: the reported proposal is limited to specified merchant payments, and the Court has not yet issued a final merits judgment.
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