Supreme Court PIL Challenges New UPI Fees Over Rs 2,000

On September 16, 2026, a public‑interest litigation landed on the Supreme Court’s doorstep, challenging the government’s freshly announced fee structure for UPI payments that cross the Rs 2,000 mark. The petition, lodged by senior counsel Anjan Datta and presented through advocate Ashutosh Dubey, claims the new merchant discount rate (MDR) framework is both unfair and legally shaky.

At the heart of the dispute is a Gazette Notification dated September 14, 2026, issued under Section 10A of the Payment and Settlement Systems Act, 2007. The notification outlines a 0.4% MDR on person‑to‑merchant (P2M) UPI transactions exceeding Rs 2,000, with a ceiling of Rs 300 for payments of Rs 75,000 and above. Certain sectors, the notice says, will face different rates.

According to the petition, the government’s approach creates a “cliff” effect: a transaction of Rs 2,001 would be taxed, while one of Rs 2,000 would escape any charge. This, the filing argues, could nudge merchants to artificially split payments or avoid using UPI for larger sales, thereby distorting market behaviour.

Beyond the abrupt threshold, the petition points out a slew of missing pieces. It asks why the Rs 2,000 limit, the Rs 1 lakh monthly‑receipt classification, the sector‑specific rates, and the Rs 75,000 cap were chosen without any publicly available data, cost‑benefit studies, or clear methodology. “The decision appears to have been made in a vacuum, without the statutory source, minutes, or safeguards that a rule of this magnitude demands,” the plea states.

Another bone of contention is the way the framework was introduced. The petition alleges that essential rate‑making powers were handed over to an unincorporated UPI and Services Steering Committee, a body that, according to the filing, lacks legislative backing, transparent standards, and proper regulatory oversight.

To address these concerns, the petitioner seeks a court‑ordered production of the entire decision‑making record – statutes, committee minutes, the legal basis for the rates, and the mechanism for distributing MDR among private players. The filing also asks the Court to either suspend or entirely quash the MDR provision for transactions above Rs 2,000, or at the very least, to demand a fresh, open consultation backed by empirical data and an impact assessment, especially for micro‑ and small‑enterprise merchants.

The Centre, for its part, defends the move as a step toward making the UPI ecosystem financially sustainable. The Finance Ministry highlighted that UPI handled 24.5 billion transactions in August 2026, and that a modest fee on higher‑value merchant payments would help fund infrastructure upgrades, cybersecurity, and support for merchants in tier‑III to tier‑VI towns and rural areas.

Officials emphasized that the fee would not affect consumers: person‑to‑person transfers remain free irrespective of amount, and merchants earning up to Rs 1 lakh per month via UPI QR codes will continue to enjoy zero charges. Moreover, more than 95 % of merchant payments that stay below Rs 2,000 will still be fee‑free.

The Reserve Bank of India echoed the government's stance, calling the MDR introduction an important measure for the long‑term health of the digital payments ecosystem, while reassuring that end‑users will not bear any cost.

Filed under Article 32 of the Constitution, the petitioner maintains that he has no personal stake in the issue and is acting purely in the public interest, given how deeply UPI has permeated everyday commerce for millions of Indians.