A viral social media image showing tiered pricing for sugar—charging ₹60 for cash, ₹61 for UPI, and ₹62 for credit cards—has ignited a debate over whether merchants will pass digital transaction costs onto consumers. This comes as a 0.4% Merchant Discount Rate (MDR) is set to apply to Person-to-Merchant (P2M) UPI transactions exceeding ₹2,000 starting October 15, capped at ₹300 for transactions of ₹75,000 or more. The government maintains that MDR is a merchant expense, not a consumer fee, and has instructed banks to ensure businesses do not directly levy these charges on customers.
Despite official assurances that 96% of merchant UPI transactions remain unaffected, concerns persist that businesses may indirectly recover these costs. While direct surcharges are prohibited, merchants might raise base product prices or offer "cash discounts" to incentivize physical currency, effectively creating price disparities based on payment methods. Retail trade organizations have already voiced opposition, noting that the new MDR could strain businesses operating on thin profit margins.
The central challenge remains whether this 0.4% cost will be absorbed by merchants or ultimately reflected in the prices of goods and services. As the new regulations take effect, the government plans to monitor compliance to ensure that digital transaction costs are not unfairly shifted to the public.
