Opposition parties in Gujarat have launched a sharp attack on the Centre's decision to introduce a 0.4 per cent Merchant Discount Rate (MDR) on specified UPI person-to-merchant (P2M) transactions above ₹2,000, effective 15 October, warning that traders will bear the brunt and consumers could eventually foot the bill.

What the New UPI Charge Framework Says

Under the framework announced by the National Payments Corporation of India (NPCI), a 0.4 per cent MDR will apply to specified P2M transactions above ₹2,000, capped at ₹300 for transactions of ₹75,000 or more. Payments to merchants up to ₹2,000 remain free, as do all person-to-person (P2P) transfers regardless of amount.

Certain sectors attract lower charges: transactions above ₹2,000 involving railways, telecommunications, insurance, fuel, and agricultural inputs will attract a flat MDR of just ₹5. Capital-market transactions will attract 0.02 per cent, capped at ₹300. Small merchants receiving up to ₹1 lakh per month through UPI QR codes under the specified small-merchant category will continue under the zero-MDR framework.

The government estimates that approximately 96 per cent of merchant transactions will remain unaffected by the new charge structure.

Congress Calls It a 'Digital U-Turn'

In a joint statement issued on Wednesday, Gujarat Congress In-charge Randeep Singh Surjewala and State Congress President Amit Chavda accused the government of a 'digital U-turn', alleging the move betrays millions of UPI users. The Congress calculated a potential annual burden of ₹5,040 crore on P2M transactions if 5 per cent of projected 2026-27 UPI transaction value falls within the new framework.

The party also raised concerns about whether the new framework could disproportionately benefit large, foreign-backed payment companies, noting that PhonePe and Google Pay together account for roughly 80 per cent of UPI's market by value. It further cautioned that any future expansion of the rate or covered categories could substantially raise the overall burden.

AAP Warns of Street Protests

Aam Aadmi Party (AAP) Gujarat organisational general secretary Manoj Sorathiya called the move a 'royal decree' and warned his party would take to the streets if required. Sorathiya argued that India's retail traders already operate on razor-thin margins of 5 to 7 per cent, and a 0.4 per cent MDR would squeeze them further — with costs likely recovered from consumers.

He also questioned the commercial justification, noting that NPCI already runs a profitable payments infrastructure. 'UPI had helped increase digital transactions and bring financial activity into the formal economy, and the charges could encourage some users to return to cash,' he said.

What the Government Says

The Finance Ministry has clarified that MDR is neither a tax collected by the government nor a direct charge payable by consumers — it is a merchant-side fee distributed among participants in the payments ecosystem, including banks and payment-service providers. Banks have been advised to ensure merchants do not pass the MDR on to customers, while UPI applications have been barred from imposing platform or hidden charges for these payments.

The Centre has described the new system as designed to provide a sustainable revenue model for the rapidly expanding UPI ecosystem while protecting individuals and small merchants. UPI, developed by NPCI — an RBI-regulated entity — has become the backbone of India's retail digital-payments system.

What Happens Next

The revised MDR framework takes effect on 15 October, and political pressure from both the Indian National Congress (INC) and AAP is expected to intensify in the weeks ahead, particularly in Gujarat. How effectively banks and apps enforce the no-pass-through rule will be the immediate flashpoint — and the answer could determine whether the opposition's consumer-impact argument gains traction.