UPI law change creates future fee power without an immediate consumer charge

The Taxation and Other Laws (Amendment) Bill, passed by the Lok Sabha on August 6, changes the legal framework around merchant discount rates for electronic payments. It does not itself impose a charge on UPI users.

The earlier provision barred banks and payment providers from charging fees on notified payment methods, including UPI, BHIM-UPI, UPI QR and RuPay debit cards. The amendment removes the permanent statutory exemption and allows the government to decide through future notifications which methods retain zero MDR.

For now, UPI payments remain free. A future charge would require a separate government notification. MDR is normally a fee paid by a merchant to the bank or payment provider for processing a digital transaction; it is different from a direct consumer fee.

The change matters because UPI is national digital infrastructure. The policy challenge is to keep the system secure and financially sustainable while protecting small merchants and everyday users from unexpected costs.