‘Have a spine’: Rahul Gandhi attacks PM Modi over new UPI merchant charges

New Delhi: Congress MP and Leader of Opposition in the Lok Sabha Rahul Gandhi on Wednesday escalated the political battle over the new UPI payment framework, demanding that Prime Minister Narendra Modi withdraw what he termed a ‘UPI tax’ and accusing the government of giving in to pressure from the United States.

In a video message posted on X, Gandhi directly called for the reversal of the new merchant payment rules, using the caption, ‘Modi ji, roll back the UPI tax. Now’.

He alleged that the government had effectively imposed a burden on Indians through UPI while benefiting the United States.

His remarks came a day after the National Payments Corporation of India (NPCI) announced a revised Merchant Discount Rate (MDR) framework for specified UPI transactions. Under the new system, a 0.4% MDR will apply to eligible person-to-merchant (P2M) transactions above ₹2,000.

The charge will be capped at ₹300 for transactions of ₹75,000 and above. The framework is scheduled to take effect from October 15, 2026.

The government, however, has maintained that the MDR is not a tax and will not be directly collected from customers. According to the Finance Ministry, UPI payments between individuals will remain free irrespective of the amount, while payments to merchants up to ₹2,000 and transactions covered under the zero-MDR framework will also remain free.

The government said around 96% of P2M transactions will remain unaffected.

Under the framework, the 0.4% MDR applies only to specified merchant transactions above ₹2,000.

For transactions worth ₹75,000 or more, the charge is capped at ₹300 per transaction.

In certain essential and thin-margin sectors, including railways, telecommunications, insurance, fuel and agricultural inputs, transactions above ₹2,000 will attract a flat MDR of ₹5.

Gandhi nevertheless argued that the impact could ultimately reach consumers if merchants pass the additional cost on through higher prices.

His criticism centres on the distinction between who is formally charged the MDR and who may eventually bear its economic impact.

Taking a broader political swipe at Modi, Gandhi invoked former prime minister Indira Gandhi while contrasting her approach with that of the current government.

He accused Modi of 'surrendering before US President Donald Trump in the context of the new UPI framework.

The Congress leader also urged the prime minister to 'have a spine and reverse the decision, making the UPI pricing framework the latest flashpoint between the Opposition and the Centre.

The government has defended the new system as a measure aimed at supporting the financial sustainability and continued expansion of the UPI ecosystem.

It has said the MDR will be distributed among participants in the payment ecosystem, including banks and payment service providers, rather than being collected as government revenue.

The dispute has consequently centred on two competing descriptions of the same policy: the government maintains that it is a merchant-side payment fee and not a consumer tax, while Gandhi has branded it a 'UPI tax and demanded its immediate withdrawal.