No extra charge on payments via RuPay credit cards, UPI from January 1, 2020

Union Finance Minister Nirmala Sitharaman on December 28, 2019 announced that digital transactions made using RuPay credit cards or UPI QR codes will not attract additional charges for merchants or customers from January 1, 2020.

  • All shops, business establishments and companies with an annual turnover of ₹50 crore or more have been mandated to offer these modes of payment to customers.
  • The Department of Revenue will notify RuPay and UPI as the prescribed mode of payment for digital transactions without any Merchant Discount Rate (MDR).
  • All banks would start a campaign to promote RuPay debit cards and UPI. The government has already amended two laws — the Income Tax Act and the Payments and Settlement Systems Act — in order to implement the budget announcement.

Impacts

  • The Government decision to choose RuPay and UPI as the platforms which will not attract this levy, may promote these home-grown digital payment pathways over those promoted by foreign companies, including VISA and MasterCard.

Background

  • In her budget speech of 2019-20 the Finance Minister had, inter alia, announced that business establishments with annual turnover of more than Rs. 50 crore shall offer low cost digital modes of payment ( such as BHIM UPI, UPI QR Code, Aadhaar Pay, Debit Cards, NEFT, RTGS etc.) to their customers, and no charge or Merchant discount rates (MDR) shall be imposed on customers as well as merchants.

What is Merchant Discount Rate?

  • The Merchant Discount Rate (MDR) is the percentage of the digital transaction that a merchant pays to banks. This cost is often passed on to the customer.

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