A Public Interest Litigation has been filed before the Supreme Court challenging the Centre’s new Merchant Discount Rate framework for specified Unified Payments Interface transactions exceeding ₹2,000.

The petitioner has sought an interim stay on the implementation of the framework, which is scheduled to come into effect on October 15.

The petition has reportedly been filed by advocate Anjan Datta, with the Union of India, the Reserve Bank of India, the National Payments Corporation of India and the UPI and Services Steering Committee named as respondents.

Buy Now: E-Magazine: 1000+ Landmark GST Judgments (2017–2026)

September Notifications Challenged

The PIL seeks the quashing of the notification issued on September 14 and the framework released on September 15 governing MDR on specified person-to-merchant UPI transactions.

Pending the Supreme Court’s final decision, the petitioner has requested that the authorities be restrained from implementing the framework.

MDR is a charge paid by a merchant to the entities facilitating a digital payment, including banks and payment service providers. Although the charge is formally imposed on merchants, the petition contends that it may indirectly affect consumers through increased prices or additional charges.

Framework Alleged To Burden Merchants And Consumers

The petition reportedly questions the basis for introducing MDR on UPI merchant transactions above ₹2,000. It alleges that the policy is contrary to consumer interest and places an unreasonable financial burden on merchants accepting digital payments.

According to the plea, the introduction of MDR could discourage merchants from accepting UPI for transactions exceeding the prescribed threshold. Smaller businesses operating on narrow margins may either seek alternative modes of payment or attempt to recover the additional cost from customers, it argues.

The petitioner maintains that such an outcome would undermine the objective of promoting cashless transactions and expanding digital payment acceptance across the country.

Safeguards Against Passing Cost To Customers Questioned

The new framework reportedly contains safeguards intended to prevent merchants from transferring the MDR burden to customers.

The petition, however, alleges that the framework does not establish an adequate enforcement mechanism to ensure compliance with this restriction.

It contends that even where merchants do not expressly impose a separate UPI charge, the MDR expense may be recovered indirectly through higher product prices, reduced discounts, service charges or other commercial arrangements.

Accordingly, the plea argues that a formal prohibition against passing on MDR may not be sufficient unless it is accompanied by effective monitoring, complaint redressal and enforcement provisions.

UPI And RuPay Classification Called Arbitrary

A central issue raised in the PIL concerns the alleged differential treatment of UPI transactions and RuPay debit card payments.

The petitioner claims that UPI merchant transactions exceeding ₹2,000 have been removed from the scope of zero-MDR protection, while RuPay debit card transactions continue to receive that protection without a corresponding value-based ceiling.

The plea questions whether there is any reasonable basis for treating the two digital payment instruments differently.

It alleges that the distinction constitutes an arbitrary classification and may violate the constitutional guarantee of equality under Article 14. The petition also questions the selection of ₹2,000 as the dividing line between transactions that remain protected and those attracting MDR.

According to the petitioner, the authorities must demonstrate that the threshold is supported by relevant economic data, cost assessments and a legitimate policy objective.

Disclosure Of Cost Studies And Committee Records Sought

The PIL has also sought disclosure of the studies, underlying data, committee recommendations and official records relied upon while formulating the MDR policy.

The petitioner alleges that the framework was introduced without adequate transparency or meaningful public consultation with merchants, consumers and other affected stakeholders.

The plea seeks judicial scrutiny of the material used by the government and payment regulators to determine the threshold, applicable rates, transaction categories and caps under the framework.

The petitioner argues that access to these records is necessary to assess whether the policy decision was based on objective data or was introduced without adequately examining its consequences for consumers and small businesses.

What The New MDR Framework Provides

Under the new framework, MDR will apply from October 15 to specified person-to-merchant UPI transactions above ₹2,000.

The applicable rate and maximum charge may vary according to the value and category of the transaction. Person-to-person UPI transfers will remain outside the MDR regime.

Consequently, ordinary transfers between individuals will not attract the merchant fee merely because the amount exceeds ₹2,000. The framework is directed at specified payments made by customers to merchants.

The policy also reportedly provides for a fund intended to support small merchants. A portion of the revenue collected through MDR is proposed to be deployed towards payment infrastructure, cybersecurity, innovation and the long-term strengthening of the UPI ecosystem.

Government Cites Sustainability Of UPI Ecosystem

The government has defended the introduction of the framework as a measure aimed at creating a sustainable revenue model for the rapidly expanding UPI infrastructure.

Payment transactions require expenditure on technology, cybersecurity, fraud prevention, customer support, dispute resolution and continuous system upgrades. The new MDR structure is intended to generate resources to support these functions while protecting smaller transactions and person-to-person payments.

The government’s position is that safeguards have been incorporated to ensure that merchants do not transfer the MDR burden to customers.

The PIL disputes the adequacy of those safeguards and asks the Supreme Court to examine whether the policy fairly balances the financial sustainability of the digital-payment ecosystem with the interests of merchants and consumers.

The Supreme Court’s consideration of the petition will determine whether the October 15 rollout may proceed or whether the framework will remain suspended while its legality is examined. The allegations raised in the PIL remain the petitioner’s contentions and have not yet been adjudicated by the Court.

Read More: Small Export Consignments Up To Rs. 3 Lakh Exempted From RCMC Requirement: DGFT