Pickpocketing citizens: DK Shivakumar slams Centre's UPI fee move, demands rollback

The Karnataka Chief Minister argued that although the MDR would technically be imposed on merchants, businesses could eventually transfer the additional expense to customers through higher prices.

Karnataka Chief Minister DK Shivakumar on Thursday attacked the Centre over its decision to introduce a 0.4% Merchant Discount Rate (MDR) on person-to-merchant UPI transactions above Rs 2,000, joining a growing chorus of Opposition leaders questioning the move.

Calling the decision "pickpocketing of every section of society" and an "insult to every common man", Shivakumar demanded that the Centre withdraw the proposed charge.

He argued that although the MDR would technically be imposed on merchants, businesses could eventually transfer the additional expense to customers through higher prices.

The new framework is scheduled to come into effect from October 15. Under it, a 0.4% MDR will be levied on person-to-merchant UPI payments exceeding Rs 2,000. For transactions of Rs 75,000 or more, the charge will be capped at Rs 300.

Consumers will continue to make UPI payments without paying a transaction fee directly. Person-to-person transfers and merchant transactions below Rs 2,000 will remain outside the levy. The framework also provides an exemption for small merchants receiving up to Rs 1 lakh per month through UPI QR codes.

Shivakumar said the measure could undermine the country’s push towards digital payments by making cash transactions more attractive.

He questioned why merchants should face an additional cost when successive governments have encouraged citizens and businesses to adopt digital modes of payment.

"This is pickpocketing every section of society. Those who transact more than Rs 2,000, this is a very great injustice to every section," he said, adding that Congress would oppose the measure and seek its rollback.

"The Congress will stand in the interest of the common man. That is our basic principle. We are protesting this and condemning this. We want them to roll it back," he added.

Shivakumar’s criticism came as several Opposition parties stepped up their objections to the proposed MDR.

Congress leader and Lok Sabha Leader of Opposition Rahul Gandhi has already described the measure as a "UPI tax" and alleged that the Centre’s decision was influenced by pressure from the US.

Rahul Gandhi argued that the absence of a direct charge on consumers does not necessarily mean they will be unaffected.

According to his argument, merchants facing higher payment costs may seek to recover the amount by raising the prices of goods and services.

Congress General Secretary KC Venugopal also attacked the decision, linking it to allegations concerning US pressure over India's oil purchases.

He accused the government of "bowing to US pressure" and claimed it could "toe the US' line and surrender to Washington".

Former Rajasthan chief minister Ashok Gehlot similarly alleged that the Centre had changed its position on UPI charges "under pressure from the United States".

Samajwadi Party chief Akhilesh Yadav also criticised the proposal on X, writing, "The BJP, in its pursuit of earning from others' earnings, is now even charging fees for payments made via UPI. Will a trillion-dollar economy be built this way?"

The former UP chief minister further accused the BJP of becoming a "toll-collector".

The Aam Aadmi Party also raised the issue on X, stating, "The Modi government’s new loot policy of forcing charges on UPI transactions is a crystal-clear example of what Arvind Kejriwal previously pointed out: Trump’s pressure on PM Modi’s decisions and his direct influence over India’s internal matters".

RSP MP NK Premachandran said imposing a levy on UPI transactions would "ultimately place an additional burden on the common people, particularly customers".

He pointed out that despite the government’s position that merchants would pay the MDR, businesses could potentially factor the cost into prices paid by consumers.

GOVT DENIES "PRESSURE" CLAIMS, SAYS NO ROLLBACK

The Centre has rejected allegations that the UPI decision was influenced by foreign pressure. The Finance Ministry described such claims as "false" and said decisions concerning UPI were being taken independently, with the objective of developing a secure and financially sustainable digital payments ecosystem.

The government has also clarified that MDR should not be treated as a tax or as a charge collected by the government.

The proceeds are expected to be distributed among banks, payment application providers and other participants in the digital payments network to help meet expenses related to infrastructure, cybersecurity, fraud prevention and customer support.

Authorities have also advised banks to ensure that merchants do not recover the MDR directly from customers.

With Opposition parties calling for the decision to be withdrawn and the Centre maintaining that there will be no rollback, the proposed MDR is likely to remain a contentious issue as the October 15 implementation date approaches.