UPI Fee Row: Government Hits Back At Rahul Gandhi Over ‘UPI Tax’

The government on Wednesday questioned the rationale behind Congress leader Rahul Gandhi's criticism of the decision to levy a fee on UPI payments to merchants above Rs 2,000, saying a parliamentary standing committee had backed such a move and Congress members of the panel had supported it.

A senior government functionary told PTI that the Parliamentary Standing Committee on Finance had pressed for a tiered Merchant Discount Rate (MDR)/ revenue framework for Unified Payments Interface (UPI) and noted that it should be notified and operationalised without delay.

What Did Rahul Gandhi Say About The ‘UPI Tax’?

Five Congress MPs including P Chidambaram, Manish Tewari, Gaurav Gogoi, Kishori Lal and K Gopinath were present on August 12 when the report was adopted, with no dissent recorded in the published minutes, the functionary said.

"Why is Rahul Gandhi opposing something his own MPs including former finance minister P Chidambaram and former minister in the UPA government Manish Tewari supported within the parliamentary panel," the functionary asked.

Reacting to the government decision to levy a fee on UPI payments above Rs 2,000 to merchants, Gandhi alleged that Prime Minister Narendra Modi has decided to "prostrate" before US President Donald Trump and give a huge amount of money to America, as per PTI.

The leader of opposition in Lok Sabha also demanded a rollback of the government's decision to levy a fee on UPI payments.

What Did The Parliamentary Panel Say?

According to the report of the standing committee headed by BJP MP Bhartruhari Mahtab, the panel noted its earlier recommendation emphasising that due to the imperative of a viable revenue model, legislative-enabling provisions for a tiered MDR structure have been brought forward.

However, the committee remained deeply concerned by the staggering mismatch between the Rs 2,000-crore allocation and the industry's estimated operational cost of Rs 20,700 crore.

In the view of the committee, while statutory enablement now exists to permit calibrated MDR on high-value transactions, any delay in notifying and operationalising this framework leaves payment service providers heavily dependent on inadequate subsidies, thereby threatening critical investments in cybersecurity, fraud prevention and network infrastructure, PTI reported.

Regarding the incentive scheme for promotion of RuPay debit cards and low-value BHIM-UPI transactions (person-to-merchant), the committee, in its report, had further observed and recommended: "The Committee note the massive Rs 2000 crore budgetary allocation for 2026-27 designed to offset ecosystem costs caused by the zero-MDR policy on RuPay and low-value UPI transactions.

"The Committee observe that while UPI is expected to process up to 150 billion transactions per month and add 600 million new users, the current government incentive covers merely 11 per cent of the industry's actual costs and 14 per cent of potential MDR collections, creating a structural funding gap impacting long-term infrastructural investment." The committee recommended that while the proposed three-year multi-year scheme and cashback components are necessary to democratise digital payments in untapped Tier 3-6 cities, the Department of Financial Services must concurrently explore a self-reliant, tiered revenue model.

The committee would like to emphasise that establishing a viable revenue mechanism is critical to ensuring that the UPI ecosystem achieves financial sustainability without perpetually straining the government exchequer, it said.