‘It’s Not A Fee, Then What Is The Character?’: SC Refuses Stay On ₹2,000-Plus UPI Transactions, Asks Centre To Explain New Rule

New Delhi: The Supreme Court on Monday decided not to pause the government's plan to charge fees on certain UPI transactions between people and merchants that are above ₹2,000. The court gave notice about a plea that questions the new framework and asked the Centre to explain the reasons and type of charges they plan to bring, through an affidavit.

A bench with Chief Justice of India Surya Kant, Justice Joymalya Bagchi, and Justice V Mohana was hearing a public interest case that asked to cancel two official notices released by the Union Ministry of Finance on September 14 and 15. The notifications explained the plan for charging on commercial UPI transactions that are more than ₹2,000.

The new framework will start being used on October 15.

SC Seeks Centre’s Explanation On UPI Charge

The petitioner’s counsel argued that the introduction of UPI had helped reduce black money transactions and questioned the move to impose charges on merchant payments.

Additional Solicitor General Venkataraman, representing the Centre, told the court that the framework would exempt 96% of transactions using gateways. He also mentioned that basic services would have a maximum charge of ₹5 and that there was a limit on the value under the new plan.

“There’s cost for doing debit/credit card transactions. UPI is not different. 2 operators provide the service. 1 are the banks. It is not statutory collection by Govt of India. It’s a settlement fee amongst the players, which NPCI facilitates. Govt not taking a rupee of this.”

The ASG further stressed that the proposed charge was not a tax or a government fee.

“It’s yet to come...OCT 15 is the first milestone. 96% using gateways are exempt. Amongst the [...] persons, essential services are capped at 5 RS. There’s a value cap. It’s not a tax or fee.”

CJI Surya Kant said the Centre should place these details before the court on affidavit. “We need these facts on affidavit. It’s more of a technical issue,” the CJI said.

What The New UPI Framework Says 

Under this system, when someone sends money through UPI to a merchant for an amount more than ₹2,000, the merchant has to pay a fee of 0.4% of that amount. The fee will have a maximum limit of ₹300 for transactions of ₹75,000 or more.

UPI transactions for up to ₹2,000 will still be free, and sending money from one person to another will also remain free. Small merchants who get up to ₹1 lakh every month via UPI QR codes and have that money directly deposited into their bank accounts will still not have to pay the levy.

The government has said that the framework is meant to help keep the digital payments system running smoothly while making sure most regular UPI transactions stay free of charge.

A lawyer representing the PIL in the Supreme Court has asked the court to cancel the government's decision to allow MDR on UPI merchant payments over ₹2,000. The petitioner has also claimed that the levy was introduced without enough legal protections, clear information, and discussions with the public.

‘If It’s Not A Fee, Then What Is The Character?’

During the hearing, Justice Joymalya Bagchi asked about the executive's power to impose the proposed charge and wanted to know more about its legal nature.

“What is the executive scope of making this expropriation? We would have understood if it was a fee. It’s not a fee, then what is the character? Charge of 1% on 140 cr Indians [...]”

When answering the court, the ASG said that the suggested UPI fee is similar to the cost of using debit or credit cards. He mentioned that UPI transactions also include service providers and settlement costs.

The Supreme Court has asked the Centre, the Reserve Bank of India (RBI), the National Payments Corporation of India (NPCI), and other parties to respond. The court has not stopped the framework for now, but it has asked the Centre to provide an explanation in an affidavit before looking into the issues mentioned in the petition.