New Delhi, 16 September— Newly announced charges on Unified Payment Interface (UPI) by the Modi government seems to be developing a new political headache for the ruling party as the move has received a very hostile reception on social media platforms as well among the stakeholders of the popular mode of payment.
While the government today strongly defended its move debunking opposition claims that its decision to levy Merchant Discount Rates (MDR) on some merchant UPI payments was influenced by foreign pressure, Lok Sabha Leader of Opposition Rahul Gandhi demanded an immediate rollback of what he described as “UPI tax” — the framework that brings changes to how certain merchant transactions are charged when making a UPI payment.
Since the announcement of the UPI charge, several critics of the move, including the main opposition Congress party, have accused the government of introducing the fee to favour the United States and please US President Donald Trump.
Congress leader Jairam Ramesh also took potshots at Prime Minister Narendra Modi saying he had “redefined NOTA” as “Narendra’s Ongoing Trump Appeasement”.
In his post on X formerly Twitter, Ramesh also criticised the government of giving in to US pressure by ending the zero-MDR regime for certain UPI transactions, question the move and asking whether it was intended to help US card companies compete with India’s digital payments system.
The new framework introduces a 0.4 per cent MDR on specified merchant transactions above ₹2,000, however, customers will not be charged MDR, according to the government.
In a video message on X — which he captioned, “Modi ji, roll back the UPI tax. Now”, Rahul Gandhi said Prime Minister Narendra Modi has put a tax on every single Indian person by taxing UPI and “giving huge amount of money to the United States.”
The remarks come amid a political row over the government’s new UPI framework. The government has set a 0.4% MDR on merchant UPI payments above ₹2,000, with the fee capped at ₹300 for transactions of ₹75,000 and above.
The government has maintained that the charge applies to merchants and not directly to customers, while the critics of this move have argued that merchants could eventually pass the additional cost on to consumers through higher prices.
The Leader of the Opposition slammed the Prime Minister over the government’s new framework allowing MDR charges on certain UPI transactions, accusing him of “surrendering” before the United States and President Donald Trump.
Drawing a comparison with former Prime Minister Indira Gandhi, Rahul said, “Indiraji was once asked whether she leaned to the left or the right. Her response was, ‘I don’t go left or right, I stand straight.’”
Taking a swipe at Modi, Rahul said, “Modiji is completely different. He is neither left nor right. He has decided to lie down straight and prostrate himself in front of Donald Trump.”
Rahul also alleged that the government’s UPI policy would effectively impose a burden on Indians. “He has put a tax on every single Indian person by taxing UPI and giving huge amounts of money to the United States,” he said.
The Congress leader urged PM Modi to “stop lying down in front of the United States” and asked him to “have a spine” and withdraw the UPI charge.
The National Payments Corporation of India (NPCI) is set to introduce a revised Merchant Discount Rate (MDR) framework from October 15, under which select high-value UPI transactions will attract a charge on merchants.
Under the new structure, certain UPI transactions above Rs 2,000 will carry an interchange charge of up to 0.4 per cent. The fee will be borne by merchants and will not be collected from consumers.
Earlier, Ramesh pointed out that while Modi govt continues to “appease” the Trump administration, the US House of Representatives would soon vote on a Bill that could levy 100 per cent tariffs on India if it gets passed.
The US Senate has already approved this draconian law, he pointed out.
Ramesh also said the Trump administration had been tightening immigration rules for Indian nationals. He pointed to higher H-1B visa costs and the possibility of stricter action against visa holders who lose their jobs, noting that a large number of H-1B holders are IT professionals.
“Here, the Modi government has given into a US demand to get rid of zero MDR and charge for UPI. The U.S. Trade Representative earlier this year criticized UPI for being free and having driven out Visa and Mastercard,” Ramesh said.
Why 0.4% MDR? Is it because debit card MDR is also 0.4%? Is this being done to enable US card companies to compete with UPI?” he said.
Is this going to make UPI “sustainable” as the government claims, the Congress leader asked.
Noting that the estimated cost of running the entire UPI ecosystem is around Rs 20,000 crore annually, Ramesh said this is less than 10 per cent of what the RBI has been transferring to the Union government in the past few years so as to show healthy public finances for the Modi government.
Meanwhile a survey conducted by LocalCircles says that only 7% of merchants and businesses surveyed are willing to absorb a 0.4% MDR on UPI transactions above Rs 2,000, indicating limited acceptance of the proposed charge among businesses.
The survey comes after the government announced that a 0.4% MDR would apply to certain UPI merchant transactions above Rs 2,000 from October 15, 2026. While the charge is levied within the merchant-payment ecosystem and not directly on consumers, the findings highlight concerns among businesses over the potential impact of the new cost.
It seems that the Modi government has unwittingly given a handle to its critics to beat it on its own turf.
Veteran Journalist and Political Commentator
