UPI MDR: PCI fact-checks Kerala Congress' ₹146 claim on ₹30,924 diesel payment, says charge is ₹5

The Payments Council of India (PCI) on Thursday disputed a claim by the Kerala Congress that a 0.4% UPI Merchant Discount Rate (MDR) on fuel payments could significantly cut petrol pump operators' margins and push up transportation costs, saying the calculation does not apply to fuel transactions.

Kerala Congress claimed that a truck filling 300 litres of diesel would require a payment of ₹30,924 and that a 0.4% MDR would cost the pump owner about ₹146. It said this would reduce the operator's gross commission by 18.66%.

The party said, "Will he absorb the hit, or pass it to the customer, or ask for cash. Why would the trucker pay extra when cash costs nothing?"

Quick answers to key questions

•5

QUESTIONS

For UPI fuel transactions above ₹2,000, a flat Merchant Discount Rate (MDR) of ₹5 applies, rather than a percentage-based charge.

The Kerala Congress claimed that a 0.4% MDR on a large diesel payment would significantly reduce petrol pump operators' margins, possibly leading to higher costs for consumers.

Small merchants collecting up to ₹1 lakh a month through UPI will remain exempt from the new MDR charges, protecting them from additional costs.

The government does not anticipate a significant increase in cash transactions as the new MDR will affect only a small percentage of total UPI transactions.

The Finance Ministry is implementing a monitoring framework to ensure that payment service providers do not transfer the MDR cost to customers.

It further mentioned that higher costs could eventually affect customers of trucking companies, particularly businesses operating on thin margins.

PCI says fuel MDR is capped at ₹5

Responding to the claim, PCI said the ₹146 calculation was based on an incorrect application of the MDR rate to fuel transactions.

"With due respect, we wish to put forward a factual clarification: The ₹146 figure does not reflect the fuel-specific MDR provision," PCI stated.

Citing the NPCI FAQ, PCI said fuel and petroleum transactions above ₹2,000 attract a flat MDR of ₹5, while transactions below ₹2,000 have zero MDR.

Under this provision, PCI said the MDR on a ₹30,924 fuel purchase would be ₹5, or ₹5.90 including 18% GST if GST is applicable, rather than ₹146.

What does NPCI's FAQ say?

The clarification refers to Q33 of the NPCI FAQ, which asks which merchant categories qualify for a flat MDR instead of a percentage-based rate.

The answer lists categories including railways, telecom services, insurance and fuel, among others, and states that a flat MDR of ₹5 per transaction applies to transactions above ₹2,000.

This means the fuel transaction cited by Kerala Congress would not attract a 0.4% MDR calculated on the entire ₹30,924 payment under the provision cited by PCI.

PCI concluded its response by saying, "We hope this clarification is helpful in keeping the discussion factually accurate and constructive."

The issue centred on the distinction between a percentage-based MDR and the sector-specific flat MDR applicable to fuel transactions, with PCI saying the latter should be used when calculating the cost of the diesel payment described by Kerala Congress.

Cash transactions unlikely to rise after 0.4% levy on payments above ₹2,000: Report

The Finance Ministry does not anticipate a significant shift towards cash payments after a 0.4% MDR is introduced on UPI transactions above ₹2,000 from October 15, according to PTI citing sources.

Officials expect the new charge to have limited impact on UPI usage, as transactions above the ₹2,000 threshold account for only around 4% of the total UPI transaction volume, the sources said.

Concerns over consumers switching to cash are also unlikely to materialise, according to its sources, as RuPay debit card transactions will remain completely free, regardless of the transaction amount.

Govt reportedly plans checks to protect consumers

The Finance Ministry is working on a monitoring framework to ensure that payment service providers do not transfer the MDR cost to customers, reported PTI citing sources. The ministry has already begun discussions with payment aggregators and other participants in the UPI ecosystem to make them aware of the new MDR and discourage any attempt to pass the charge on to users.

The government also does not expect the new levy to significantly push up prices of goods and services. They mentioned the measure is unlikely to create an inflationary impact.

GST impact expected to remain limited, says report

Sources said GST charged on MDR is expected to be largely neutralised through input tax credit, limiting its effect on the overall cost of transactions.

The ministry has categorised various types of transactions under specialised categories and does not expect GST on MDR to create a significant additional burden, the sources said.

However, should any unresolved questions concerning GST on MDR arise, they may be placed before the GST Council for consideration at its upcoming meeting, they added.

About the Author

Garvit Bhirani is a journalist based in Gurugram. He is a Deputy Chief Content Producer at LiveMint, where he covers national and international news stories, focusing on accuracy and compelling storytelling for readers. <br><br> With a total of six years of experience in journalism, he has previously worked with Vaco Binary Semantics for Google, taking on the role of news curation lead, and reported from the field on health, education, and agriculture stories for 101reporters and News9. He has also served as a content editor for entertainment and news media organisations. <br><br> Garvit holds bachelor’s and master’s degrees in journalism and mass communication from Guru Gobind Singh Indraprastha University and Gurugram University, respectively. During college days, he joined India’s only non-profit student journalism network, where he anchored daily news updates and produced his own weekly show called ‘Data Fix’. <br><br> He was selected for the YES Foundation Media for Social Change Fellowship in Delhi, the Talking Data to the Fourth Pillar residential workshop, and the VOICE Fellowship in Pune. <br><br> He holds certificates in COVID-19-verification reporting, data journalism, food & agriculture, tech policy, media literacy and countering misinformation, and tackling election disinformation courses from Thomson Foundation, IndiaSpend, The Dialogue, US Mission in India, and AFP. <br><br> He can be reached on <a href="https://www.linkedin.com/in/garvit-bhirani">LinkedIn</a> or on <a href="https://x.com/GarvitBhirani">@garvitbhirani</a> on X

^{Get Latest real-time updates}

Stay updated with the latest Trending, India, World and US news.

HomeNewsIndiaUPI MDR: PCI fact-checks Kerala Congress' ₹146 claim on ₹30,924 diesel payment, says charge is ₹5