Business & Finance

Ashneer Grover Challenges UPI Merchant Fee, Calls It a 'Tax'

By Poorva Joshi

Entrepreneur Ashneer Grover has questioned the recently announced merchant charge on UPI transactions exceeding ₹2,000, stating that consumers will ultimately bear the cost. This comes despite government clarifications that the fee will not directly impact consumers and that person-to-person UPI payments will remain free.

Grover, former co-founder of BharatPe, argued in a TV interview that any levy on UPI payments should be explicitly labeled a “tax.” He dismissed the argument that only those who can “afford” the fee are being asked to pay, comparing it to paying for breathing.

The government defines Merchant Discount Rate (MDR) as a charge within the payment ecosystem, not a tax, and clarifies it is not collected by the government or NPCI.

In an X post, Grover presented figures to challenge the necessity of the merchant fee. He noted the RBI's surplus to the government of ₹2.87 lakh crore (US$30 billion), total listed bank profits of ₹4.11 lakh crore (US$42 billion), and the National Payments Corporation of India (NPCI) reporting a pre-tax surplus of ₹1,888 crore (US$200 million). He questioned who is incurring losses from UPI and what subsidies the government is paying. Grover also suggested shutting down ATMs and cash logistics to promote UPI, citing their high operational costs.

Regarding the government's assertion that consumers will not be affected, Grover drew a parallel to petrol prices, stating that despite excise duties on oil companies, consumers ultimately pay higher prices at the pump. He concluded that regardless of whether it's a tax or another charge, the consumer pays in the end.

The government has stated that approximately 96% of merchant transactions will not be affected by the charge, as they are either below ₹2,000 or fall under the zero-MDR framework for small merchants. The merchant fee for transactions above ₹2,000 is scheduled to take effect on October 15.