UPI charges row: Govt vs Rahul Gandhi as Cong MPs’ panel stand triggers war of words; Gogoi, Tewari respond

The Union government has questioned the rationale behind Congress leader Rahul Gandhi's criticism of the decision to levy a fee on UPI payments to merchants above ₹2,000, saying a parliamentary standing committee had backed such a move and Congress members of the panel had supported it.

A senior government functionary, as quoted by news agency PTI, said the Parliamentary Standing Committee on Finance had pressed for a tiered Merchant Discount Rate (MDR)/ revenue framework for Unified Payments Interface (UPI) and noted that it should be notified and operationalised without delay.

Five Congress MPs including P Chidambaram, Manish Tewari, Gaurav Gogoi, Kishori Lal and K Gopinath were present on August 12 when the report was adopted, with no dissent recorded in the published minutes, the functionary said.

Quick answers to key questions

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QUESTIONS

Starting October 15, a fee of 0.4% will be applied to person-to-merchant transactions exceeding ₹2,000, capped at ₹300, while transactions up to ₹2,000 will remain free.

The fee aims to create a sustainable revenue model for the UPI ecosystem, which has been underfunded, ensuring investments in security and infrastructure can continue without over-reliance on government subsidies.

While small merchants will continue to be exempt from charges, they may still experience indirect impacts as the new fee structure could influence pricing strategies and cost structures in the wider market.

The tiered MDR allows for higher-value transactions to be charged, helping fund the UPI system, while ensuring small and low-value transactions remain cost-free, thus aiming to balance revenue needs with user accessibility.

Merchants may face challenges as the new fees could lead to price adjustments for consumers, even though they cannot directly pass on the charges, making it important for them to monitor customer response to these changes.

"Why is Rahul Gandhi opposing something his own MPs including former finance minister P Chidambaram and former minister in the UPA government Manish Tewari supported within the parliamentary panel," the functionary asked.

What did Rahul Gandhi say?

Reacting to the government decision to levy a fee on UPI payments above ₹2,000 to merchants, Gandhi alleged that Prime Minister Narendra Modi has decided to "prostrate" before US President Donald Trump and give a huge amount of money to America.

The leader of opposition in Lok Sabha also demanded a rollback of the government's decision to levy a fee on UPI payments.

According to the report of the standing committee headed by BJP MP Bhartruhari Mahtab, the panel noted its earlier recommendation emphasising that due to the imperative of a viable revenue model, legislative-enabling provisions for a tiered MDR structure have been brought forward.

However, the committee remained deeply concerned by the staggering mismatch between the ₹2,000-crore allocation and the industry's estimated operational cost of ₹20,700 crore.

In the view of the committee, while statutory enablement now exists to permit calibrated MDR on high-value transactions, any delay in notifying and operationalising this framework leaves payment service providers heavily dependent on inadequate subsidies, thereby threatening critical investments in cybersecurity, fraud prevention and network infrastructure.

Regarding the incentive scheme for promotion of RuPay debit cards and low-value BHIM-UPI transactions (person-to-merchant), the committee, in its report, had further observed and recommended: "The Committee note the massive ₹2000 crore budgetary allocation for 2026-27 designed to offset ecosystem costs caused by the zero-MDR policy on RuPay and low-value UPI transactions.

“The Committee observe that while UPI is expected to process up to 150 billion transactions per month and add 600 million new users, the current government incentive covers merely 11 per cent of the industry's actual costs and 14 per cent of potential MDR collections, creating a structural funding gap impacting long-term infrastructural investment.”

The committee recommended that while the proposed three-year multi-year scheme and cashback components are necessary to democratise digital payments in untapped Tier 3-6 cities, the Department of Financial Services must concurrently explore a self-reliant, tiered revenue model.

The committee would like to emphasise that establishing a viable revenue mechanism is critical to ensuring that the UPI ecosystem achieves financial sustainability without perpetually straining the government exchequer, it said.

Tewari responded and called it unfortunate that proceedings of Parliamentary Standing Committees that are supposed to be privileged are being sought to be used by the government to score brownie points .

Tewari, Gogoi respond

Tewari, a former Union Minister said, that to claim that a particular measure was supported by ‘certain members’ of the committee is an inaccurate and fallacious characterisation of the confidential proceedings of a Parliamentary Committee.

“My colleague Gaurav Gogoi is correct no specific proposal qua the recent Merchant Discount Rate -MDR to be levied on UPI transactions from October 15th 2026 was ever brought before the Parliamentary standing of Finance- rate, quantam , amount of fee to be charged, ceiling and exemption slabs etc,”

“Even on the principle or conceptual basis of MDR as my colleague Gaurav Gogoi points out concerns were raised by members with regard to its need , efficacy etc over the course various sittings of the Committee,” Tewari said.

Even on the principle or conceptual basis of MDR... concerns were raised by members.

Earlier, Gogoi also referred to the meeting and said that the questions were raised on the need for MDR. But, he said, the representatives of the government did not have any specific or satisfactory answers at that point.

“I reiterate that the recent UPI tax policies hurt the small Indian merchants , vendors, entrepreneurs and help the major American corporations,” Gogoi wrote on X.

(With agency inputs)

About the Author

Gulam Jeelani is Political Desk Editor at LiveMint with over 16 years of experience covering national and international politics. Based in New Delhi, Jeelani delivers impactful political narratives through breaking stories, in-depth interviews, and analytical pieces at LiveMint since February 2024. The expertise in video production fuels his current responsibilities, which include curating content and conducting video interviews for an expanding digital audience.<br><br> Jeelani also travels during elections and key political events and has covered assembly elections in key states apart from national elections. He has previously worked with The Pioneer, Network18, India Today, News9Plus and Hindustan Times.<br><br> Jeelani’s tenure at LiveMint and previous experience at print and digital newsrooms have honed his skills in creating compelling text and video stories, explainers, and analysis that resonate with a diverse viewership.<br><br> Before moving to New Delhi in 2015, Jeelani was based in Uttar Pradesh, where he worked for five years as a reporter. In 2018, Jeelani was one of the two Indian journalists selected for the Alfred Friendly Fellowship in the US. There, he attended training workshops on reporting and data journalism, and he was attached to the Minneapolis Star Tribune in Minnesota, where he worked as a reporter.<br><br> Jeelani is a Bachelor's in Chemistry and holds a Masters Degree in journalism and mass communication from Aligarh Muslim University. Outside work, he enjoys poetry, cricket and movies.

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