Rahul Gandhi, Congress MP and Leader of Opposition in Lok Sabha, has criticized the Centre’s new Merchant Discount Rate (MDR) framework for certain UPI merchant transactions and has asked Prime Minister Narendra Modi to remove what he described as a “UPI tax.”
As he did in a statement on Wednesday, September 16, Rahul Gandhi said, “Modi ji, roll back the UPI tax. Now,” heightening the political debate over the changes to the country’s digital payment system. His remarks were issued a day after the Union government outlined the new UPI framework and clarified which transactions would remain free.
The controversy is around the introduction of MDR of 0.4% for person-to-merchant (P2M) UPI transactions above ₹2,000. But the government has stressed that the MDR is not a tax and that customers making UPI payments will not be charged the amount directly.
What is the new UPI MDR framework?
According to the Ministry of Finance, the revised framework only applies to merchant transactions above ₹2,000. An MDR of 0.4 percent will be distributed among banks, payment service providers and UPI application providers.
For transactions worth ₹75,000 or more, the MDR will be capped at ₹300 per transaction. The government has also prescribed a flat ₹5 MDR for some transactions above ₹2,000 in essential and thin-margin sectors such as railways, telecommunications, insurance, fuel and agricultural inputs.
The government has also stressed that person-to-person UPI payments will continue to be totally free regardless of the amount transferred. Also, merchant payments up to ₹2,000 will be free of MDR.
The Finance Ministry said around 96% of merchant transactions will remain unaffected under the new framework. It also said small merchants receiving up to ₹1 lakh per month through eligible UPI QR transactions will continue to receive zero-MDR treatment.
Rahul Gandhi Calls For Rollback
Modi ji, roll back the UPI tax. Now. pic.twitter.com/IIt46zMgCG
— Rahul Gandhi (@RahulGandhi) September 16, 2026
Rahul Gandhi has objected to the introduction of the new MDR framework and referred to it as a “UPI tax” in his criticism of the government. His demand comes at the same time a political debate is being waged about the future of India’s digital payments ecosystem and how the costs of maintaining and expanding UPI should be distributed.
Gandhi also invoked former Prime Minister Indira Gandhi in his speech and drew a political comparison with the present government. The Congress leader argued that the Centre needed to re-examine the new framework and called directly on PM Modi to roll it back.
The Congress criticism has focused on the introduction of charges in the merchant payment ecosystem, while the government’s explanation has stressed that the new MDR does not create a direct transaction fee for consumers.
Government Says Customers Will Not Pay MDR
The Centre has specifically said that MDR should not be confused with a fee imposed on individuals using UPI. According to the Ministry of Finance, customers will continue to have free access to UPI for person-to-person transactions and for merchant payments up to ₹2,000.
Banks have also been advised to ensure that merchants do not pass the MDR on to customers. UPI application providers have been prohibited from imposing platform fees or hidden charges under the framework.
The government is saying the new framework is intended to ensure the long-term survival of the UPI ecosystem as well as the payment of everyday digital payments for people and small businesses that are free of cost.
UPI charge row becomes political flashpoint
The dispute now has turned the new MDR framework into a political issue, with the Congress calling for its withdrawal, and the Centre defending it as a limited charge on certain merchant transactions.
In August, the government had said that any future MDR would apply only to a certain category of merchant transactions above a certain threshold, and that consumers would not be charged transaction costs.
With UPI now embedded in everyday payments in India, the debate over MDR will likely be centered on how the payment ecosystem is funded, whether merchants should bear the cost and how the government can safeguard the system's widespread affordability.
At present, however, the only difference is that the new 0.4% MDR is applied for merchant transactions above ₹2,000 and ordinary person-to-person UPI transfers are free. Rahul Gandhi has called for the framework to be rolled back, saying it is a “UPI tax.”
