Pinching pockets
The National Payments Corporation of India (NPCI) announced on Sept 15 a Merchant Discount Rate (MDR) for select UPI transactions. From Oct 15, a 0.4% MDR will apply to person-to-merchant (P2M) UPI transactions above ₹2,000, subject to a maximum charge of ₹300 per transaction. Because payments went directly into their bank accounts, m Ravi, president of the Chennai Hotels Association, said the impact would be felt by businesses of different sizes, even as hotels preferred UPI.
Large retailers said they could absorb it as the charge was too small to affect prices. Retailers in some sectors, however, said they were awaiting clarity on how the new rules would apply to them. A M Vikramaraja, president of the Federation of Tamil Nadu Traders’ Association, said the new charge would add to the financial pressure on traders already struggling with multiple regulatory and operating costs. We will stop encouraging digital payments and insist that they pay in cash,” he said. The govt has also said customers should not be charged separately for making UPI payments.
“We will not pay the tax from our pocket. We will recover it from customers. The framework keeps person-to-person payments free, while small merchants covered under the P2PM category will continue to enjoy zero MDR. The charge is a fee within the digital payments ecosystem, not a tax collected by the govt.
Today, the government says there is no charge for UPI transactions up to ₹2,000. Large retailers, however, said the 0.4% MDR was too small to warrant passing the cost on to customers. The MDR of 0.4% is too small to have an impact. But we already pay around 2% when purchasing a UPI machine, apart from GST. Imposing charges on UPI transactions above Rs 2,000 is unfair. If someone buys an electronic item worth Rs 75,000 through UPI, the trader will face a charge of Rs 300 and will increase the selling price accordingly.
Because the money goes directly into our accounts, uPI is convenient.
Vikramaraja said traders were already facing pressure from compliance requirements, including GST, FSSAI, city corporation regulations and labour department rules. We will absorb it; it will not be passed on to customers,” said Ramesh Pothy, managing director, Pothys. This will affect many businesses,” he said. “The government sometimes takes decisions without considering the difficulties faced by businesses,” he said. Earlier reporting noted: A fee on high-value UPI transactions could eventually raise prices for consumers, traders across sectors said, with the impact likely to be sharper on large-ticket purchases. Traders, however, said the impact would depend on the transaction’s size and nature. Earlier reporting noted: Meghraj Dodwani, president of Shree Ahmedabad Vepari Mahasangathan, said, “Traders would ultimately have to factor the additional cost into prices.
“We are already on the verge of surrendering to corporates. What is the guarantee that smaller transactions will not be charged in the future? How are small traders expected to do business?” he asked. They pointed out that UPI, along with credit and debit cards, had become deeply embedded in retail transactions after demonetisation and had since spread to smaller towns. “We do not have the right to ask a customer to use another mode of payment if they prefer UPI. “When customers pay in cash, we have to take it to the bank the next day. Why should there be another charge? large-ticket transactions could make the additional expense harder to absorb While businesses may absorb the cost on smaller purchases for now. It will cause heavy losses for traders, who will ultimately pass the burden on to customers.
Earlier reporting noted: The charge will be borne by merchants rather than customers.