Customers should not be charged extra because they pay through UPI. India’s Ministry of Finance says merchants should not pass merchant discount rate (MDR) charges on to customers, and UPI application providers must not impose platform fees or hidden charges. A September 2026 government release describes MDR for some merchant transactions, but the release does not state when its new schedule takes effect. [Ministry of Finance, 15 September 2026]
Can a merchant add a fee for UPI?
Under the Ministry of Finance’s stated policy, a merchant should not add a customer surcharge because the customer pays by UPI. The Ministry says MDR is a merchant-side charge and that banks have been advised to ensure merchants do not pass it on. It also says UPI application providers are expressly prohibited from imposing platform fees or hidden charges. [Ministry of Finance, 15 September 2026]
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The key distinction is who bears the payment-processing cost: an MDR may apply to a merchant transaction under the announced framework, but that does not make it a customer fee. The Ministry puts it this way: “MDR is a charge within the merchant payment ecosystem. It is not a charge on customers making UPI payments.”
Which UPI transactions does the announced MDR framework cover?
The Ministry of Finance’s 15 September 2026 release describes the following treatment. It does not give a commencement date, so these are announced framework details—not confirmation that the rates were already in force on that date. Check for a later official direction before relying on them as current charges. [Ministry of Finance release] [Department of Financial Services FAQ listing]
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| Transaction type | MDR described in the release | Customer treatment stated by the Ministry |
|---|---|---|
| Person-to-person (P2P) | No charge, regardless of amount | No transaction, platform or other UPI charge for sending or receiving money |
| Merchant payment up to ₹2,000 | Zero MDR | No customer charge for the payment |
| Qualifying small merchants in the P2PM category, receiving up to ₹1 lakh per month through UPI QR | Zero MDR on all transactions | The release says the category continues to have zero MDR; it does not say every small-looking shop qualifies |
| Specified P2M merchant transactions above ₹2,000 | General rate of 0.4%; capped at ₹300 per transaction for transactions of ₹75,000 and above | MDR is merchant-side and should not be passed on to customers |
| Transactions above ₹2,000 in railways, telecommunications, insurance, fuel and agricultural inputs | Flat ₹5 MDR | MDR is merchant-side and should not be passed on to customers |
| Payments related to mutual funds, securities, stockbrokers and dealers | 0.02% MDR, capped at ₹300 per transaction | MDR is merchant-side and should not be passed on to customers |
These categories and rates are as described in the Ministry’s release; the release does not establish that every merchant or transaction above ₹2,000 is covered by the general rate. MDR is distributed among payment ecosystem participants, including banks and payment application providers. The Ministry says it is not a tax or a charge collected by the government or NPCI. [Ministry of Finance, 15 September 2026]
Does a UPI payment above ₹2,000 attract GST?
The ₹2,000 threshold in the September 2026 announcement concerns MDR treatment; it is not a GST threshold. In an 18 April 2025 statement, the Ministry said there was no proposal at that time to impose GST on UPI transactions above ₹2,000. It also said P2M UPI MDR had been removed effective January 2020. That statement describes the earlier policy and predates the 2026 announcement of MDR for specified merchant transactions; it does not establish whether the later schedule has commenced. [Ministry of Finance, 18 April 2025] [Ministry of Finance, 15 September 2026]
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How many merchant transactions would be affected?
The Ministry estimates that approximately 96% of P2M transactions will remain unaffected because they are below ₹2,000 or covered by the small-merchant zero-MDR framework. It says about 4% would attract MDR. These are paired estimates from the Ministry’s own data analysis, not independently audited figures. [Ministry of Finance, 15 September 2026]
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What to do if a shop asks for an extra UPI charge
- Ask what the charge is for. Check whether the amount is explicitly tied to paying by UPI or is a separate fee unrelated to the payment method. The government statement does not determine whether unrelated service fees are valid.
- Keep the evidence. Save the bill or receipt, payment confirmation or screenshot, merchant details and transaction reference.
- Ask about another payment method. If you do not want to pay a disputed UPI fee, ask whether cash or card is accepted. Compare the final amount, availability, convenience and any card or bank terms; no method is guaranteed to be available, cheaper or free.
- Check current complaint instructions. The official sources cited here do not give a customer escalation sequence, contact or timeline. Consult the current instructions in your UPI app and from your bank or NPCI before escalating. [NPCI UPI FAQ]
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