Union Govt., Banks To Decide Subsidy Amount For UPI After Charges Kick In, Pg1

Key Highlights:

• The Union government will hold discussions with the Indian Banks’ Association (IBA) to determine the future quantum and form of government subsidy for UPI transactions.
• This comes as the Merchant Discount Rate (MDR) on UPI transactions is set to go live on October 15, which is deemed insufficient to cover the platform's operational costs.
• The government has allocated ₹2,000 crore for the current financial year under an incentive scheme for RuPay debit cards and low-value BHIM-UPI transactions.

Detailed Insights:

• The Ministry of Finance aims to coordinate with the IBA to prevent merchants from passing the MDR charge on to customers.
• Discussions will also involve the Confederation of All India Traders (CAIT) to explain the MDR charge and its limited impact on most merchants.
• The levy of Goods and Services Tax on the MDR amount is a matter for the GST Council to decide, as UPI is considered a service.
• The Ministry of Petroleum will engage with petroleum dealers regarding their concerns about MDR impacting profit margins, though no waiver is proposed.
• The upcoming GST Council meeting on October 7 will focus on process reforms rather than rate issues.

Key Concepts Involved:

• UPI (Unified Payments Interface): An instant real-time payment system developed by NPCI facilitating inter-bank peer-to-peer and person-to-merchant transactions.
• Merchant Discount Rate (MDR): A fee paid by a merchant to their bank for accepting payments through digital modes like debit/credit cards or UPI.
• BHIM-UPI: A mobile payment application developed by NPCI based on the UPI framework, enabling simple, fast, and secure transactions.
• RuPay: An Indian multinational financial services and payment network, conceived and launched by the National Payments Corporation of India (NPCI).
• GST Council: A constitutional body that makes recommendations to the Union and State Governments on issues related to Goods and Services Tax.