Delhi traders plan cash payments push to avoid fee on UPI payments

With the central government introducing a 0.4% fee on UPI transactions above ₹2,000, traders' associations said they would now push for cash payments to avoid additional costs on digital payments.

The government on Tuesday introduced the charge as part of a framework for large digital merchant payments, ending the zero-Merchant Discount Rate (MDR) regime that has been in place since January 2020. The charge has been capped at ₹300 for payments of ₹75,000 and above.

Kamla Nagar Market Association president Nitin Gupta said traders had supported the government's push for digital payments, but would now encourage cash transactions if they were required to bear an additional charge.

"We were already paying transaction charges and 18% GST. Now if the government charges us on UPI MDR, then we will promote cash. When the government came with the UPI payment method, we supported it," Gupta said.

"Now if we are charged for UPI transactions also, then we will not support it and start promoting cash payments. Why should we pay transaction charges?" he asked.

Gupta urged shopkeepers and traders to start encouraging cash payments, saying accepting the new charge could lead to an increase in the rate in the future.

"We have got used to digital payments. Even when we go to the market, sometimes we don't even carry cash. It will be tough for us to go back to cash payments," he added.

New Delhi Traders Association general secretary Amit Gupta told PTI that the additional charge would make UPI payments a costly option for traders who are already operating on tight margins.

"UPI was introduced to make digital payments easier for both traders and customers. If traders are now asked to bear an additional charge on transactions above ₹2,000, many of them will prefer cash payments. We have no issue with digital payments, but the additional cost should not be imposed on traders," he said.

Sanjiv Mehra, president of the Khan Market Association, said traders were already opposing MDR on credit card transactions and would now have to deal with a charge on UPI payments as well.

"We were already fighting against MDR on credit cards and now we will be charged on UPI also. If we are charged on UPI transactions, then we will promote cash payments," Mehra said.

He said traders would also consider using cheques and other banking channels for larger payments to wholesalers and other businesses.

Rajat Jain, a retail shopkeeper in Kamla Nagar, said the new charge would be difficult for retailers, particularly those located near Delhi University colleges where students frequently make low-value purchases.

"A lot of students come here, and some of them buy products worth ₹10 or ₹20 also. Now we can't ask them to pay even one penny extra, but we are paying GST and other charges, and now we are expected to pay on UPI also," Jain said.

"Even if we ask customers to pay in cash, they say they use UPI. So like this, all the burden is on us," he said.

Sadar Bazar Bari Market Traders Association president Paramjit Singh Pamma said the move would increase costs for small, medium and wholesale traders handling a large number of UPI transactions above ₹2,000.

He said even a small charge on individual transactions could become a significant expense over a month or a year and urged the government to keep digital payments low-cost for traders.

Customer Kapil Arora said higher costs for traders could eventually affect consumers.

"If traders have to pay a lot of charges, then they will charge it from us as well. This way, not only traders but customers will also be troubled," he said.

Under the new framework, small merchants earning up to ₹1 lakh a month through UPI QR codes will remain exempt, with the government saying the exemption covers 96% of merchant transactions.

The new MDR cannot be passed on to customers. Person-to-person UPI transfers, which account for 37% of UPI volume and 70% of its value, will remain outside the charge.

Essential sectors such as railways, telecom and fuel will attract a flat ₹5 fee per transaction, while capital market transactions will have a 0.02% rate.