A public interest litigation has been filed in the Supreme Court challenging the Centre’s decision to impose a 0.4 per cent charge on certain commercial transactions above Rs 2,000 made through the Unified Payments Interface (UPI), with the petitioner seeking withdrawal of the levy. The plea argues that introducing charges on a payment system that has grown rapidly because of its low-cost structure could affect merchants and consumers and undermine the wider objective of encouraging digital transactions across the country.
Charge challenged
The petition challenges the decision to introduce the charge on person-to-merchant transactions exceeding Rs 2,000 and seeks directions to prevent its implementation. It contends that UPI has developed into a crucial component of India’s digital payments infrastructure and that imposing a transaction-linked cost could particularly affect small businesses and consumers who have increasingly shifted away from cash. The plea also raises questions over whether merchants may ultimately pass the additional cost on to customers, increasing the effective cost of digital payments.
Digital payments flagged
The petitioner has highlighted the scale of UPI adoption in India and argued that its success has been driven partly by the absence of transaction charges for users and merchants. The plea maintains that introducing a fee on a segment of transactions could discourage merchants from accepting larger payments through UPI or prompt them to prefer alternative payment methods. It has sought judicial scrutiny of the framework and its implications for the broader push towards a cashless economy.
October rollout
The challenged framework is scheduled to take effect from October 15 and provides for a 0.4 per cent charge on specified merchant UPI transactions exceeding Rs 2,000. Person-to-person transfers are not covered by the levy, while merchant transactions falling outside the prescribed category will continue under the existing arrangement. The government has maintained that the overwhelming majority of UPI transactions will remain unaffected.
The Centre has also rejected political descriptions of the charge as a “UPI tax”, maintaining that it is not a tax collected by the government but a payment intended to support participants in the digital payments ecosystem.
SC intervention sought
The PIL asks the Supreme Court to examine the legality of the decision and its potential impact on consumers, merchants and the expansion of digital payments. The petition comes amid a wider debate over how the rapidly growing UPI ecosystem should be financed while keeping transactions affordable for users.
The matter is expected to come up before the Supreme Court, where the petitioner will seek relief against implementation of the new charge before it takes effect next month.