PIL Before Supreme Court Challenges Centre's Move To Charge MDR On UPI Transactions Over ₹2000

 A PIL has been filed in the Supreme Court challenging the Centre’s recent framework permitting Merchant Discount Rate (MDR) on specified high-value Unified Payments Interface (UPI) transactions above Rs 2,000. 

The plea, filed by advocate Anjan Datta through AOR Ashutosh Dubey challenging Gazette Notification issued by government under Section 10A of the Payment and Settlement Systems Act, 2007 (PSS Act), as amended by the Taxation and Other Laws (Amendment) Act, 2026. 

By the impugned notification, the Union of India has, for the first time since the zero-Merchant Discount Rate (MDR) regime was introduced in December 2019, withdrawn the statutory ‘no-charge’ protection in respect of Unified Payments Interface (“UPI”) transactions exceeding Rs. 2,000/-, while continuing to extend identical protection to RuPay-powered debit cards without any monetary ceiling whatsoever. 

The petition states that it does challenge the legitimate objective of maintaining secure and resilient payment infrastructure, but the manner in which a nationwide compulsory payment burden has been created, classified and distributed without publication of the complete operative instrument, statutory source, underlying cost study, minutes, methodology, safeguards or enforceable anti-pass-through mechanism.

The public announcement made by Centre states that P2P transfers remain free; P2M payments up to ₹2,000 remain free; a 0.4% MDR applies above ₹2,000; transactions of ₹75,000 and above are capped at ₹300; specified essential sectors attract a flat ₹5 charge; capital-market payments attract 0.02%; and P2PM merchants receiving up to ₹1 lakh per month remain exempt. It further asserts that merchants cannot pass the MDR to consumers.

"...the framework itself acknowledges that the merchant must bear a charge on each qualifying receipt. For low-margin traders, service providers and digitally dependent businesses, that cost necessarily enters the price structure, reduces working capital, or induces refusal of UPI and splitting of transactions. A bare direction against an expressly recognised economic consequence does not eliminate the burden," the plea argues.

Court has further been told that the ₹2,000 transaction threshold, the ₹1 lakh monthly-receipt classification, the differential sector rates, and the ₹75,000 cap are unsupported in the public domain by disclosed data or determining principles. "A transaction of ₹2,001 attracts a percentage charge while one of ₹2,000 does not; a merchant may lose protection by crossing a monthly aggregate boundary unrelated to margin, turnover, geography or ability to bear the fee; and the framework grants a proportionately larger benefit to very high-value transactions through the cap. These cliffs are capable of distorting behaviour and discriminating between similarly situated merchants," the petition states.

As per the petitioner this selective and unequal withdrawal, and the consequential fixation of a detailed, multi-tiered financial levy through a press release rather than a notified statutory instrument, and without any legislatively prescribed guidelines, criteria, or Gazette publication governing the rates, caps, or sectoral classifications so fixed, is manifestly arbitrary, discriminatory, and violative of Articles 14 and 19(1)(g) of the Constitution, and suffers from the vice of excessive and impermissible delegation of essential legislative and fiscal function to an unincorporated Steering Committee acting outside any Gazette-notified rule-making process.

"A compulsory, nationwide MDR cannot rest merely on FAQs or a press release. The Respondents must disclose the Gazette notification, circular, statutory provision, constitution and authority of the UPI and Services Steering Committee, its decision and minutes, and the legal basis on which an NPCI headed body may prescribe rates and distribution among private ecosystem participants. Essential rate-making and classification choices cannot be sub delegated without clear legislative policy, standards, publication and regulatory supervision," it argues.

The Petitioner also seeks production of the complete record; quashing or suspension of the framework insofar as it imposes MDR above ₹2,000; and, alternatively, reconsideration after transparent consultation, publication of empirical data and an impact assessment, a rational classification protecting micro and small enterprises, enforceable safeguards against pass through and digital exclusion, and independent review by the RBI and Union Government.

Case Title: Anjan Datta vs. Union of India & Ors.