Dharwad traders seek removal of proposed MDR on UPI payments

The Dharwad Chamber of Commerce and Industries has urged the government to withdraw proposed Merchant Discount Rate charges on specified Unified Payments Interface transactions. In a memorandum to the Finance Minister submitted through the Dharwad Deputy Commissioner, the chamber welcomed the expansion of digital payments but opposed provisions that would impose the charge on merchants. The organisation questioned the rationale for applying MDR to transactions above ₹2,000 and described a proposed ₹300 cap as discriminatory.

It also argued that shifting the cost from the payer to the merchant was inconsistent with the principle of ease of doing business. The chamber said the impact could be particularly serious for traders selling goods with printed maximum retail prices and operating on narrow margins. Such businesses might have to absorb the cost until stocks carrying revised prices reached the market.

It warned that additional charges could lead consumers to choose cash payments instead of UPI. That, it said, could undermine the expansion of digital payments and increase the government’s costs for managing currency printing and distribution. The chamber argued that UPI, as a government-backed payment infrastructure, should not impose charges on merchants.

It proposed that the government bear the cost in the same way it supports currency printing and distribution. It also suggested establishing a Merchant Service Recognition Fund. The fund could be financed by allocating a small share of taxes collected through merchants, including GST, and used to recognise their contributions to tax collection, employment and service delivery.

The source material did not include a government response to the chamber’s memorandum or indicate whether the proposed MDR provisions had been finalised.