Parliament Passes Taxation Bill, No UPI Charges for Users

The Parliament has passed the Taxation and other Laws (Amendment) Bill, which does not impose any tax or transaction charge on users making payments through the Unified Payments Interface (UPI).

Finance Minister Nirmala Sitharaman made it clear that the legislation is an enabling provision and does not introduce a Merchant Discount Rate (MDR) charge on consumers at this stage.

The Bill, which was passed by the Lok Sabha last week, was returned by the Rajya Sabha with a voice vote after a brief discussion and reply by the Finance Minister.

Sitharaman stated that the proposed amendment to Section 10A of the Payment and Settlement Systems Act is only an enabling provision and does not impose any tax or transaction charge on UPI users.

The Finance Minister further stated that after the approval of the Parliament, the UPI and Services Steering Committee of the National Payments Corporation of India (NPCI) will consider whether an MDR charge should be introduced.

The clarification comes amid growing speculation that a transaction fee would be charged on UPI payments following the government's proposed amendments.

The Finance Ministry had issued a statement on Saturday to clarify that person-to-person UPI transactions will continue to remain free of charge under the new proposal.

The government said that if MDR is introduced, it would apply only to a limited set of merchant transactions above a specified threshold and would be charged at a nominal rate.

Government officials said that over 90 per cent of the transactions that include daily purchases of milk, vegetables, and groceries will not attract an MDR charge.

The government highlighted that UPI was introduced in 2016 and has remained free of charge for both merchants and citizens since January 2020.

The government also highlighted India's achievement in developing UPI into the world's largest real-time interoperable payment system.

In conclusion, the passing of the Taxation and other Laws (Amendment) Bill brings clarity to the speculation surrounding UPI charges, and users can continue to make transactions without incurring any additional fees.

This development is significant for India's digital payment ecosystem, and the government's decision to keep UPI transactions free of charge is expected to boost the country's digital economy.