Supreme Court Demands Clarification on UPI Charges by October 15

The Supreme Court of India has called for an affidavit from the Union Government regarding its recent decision to impose charges on Unified Payment Interface (UPI) transactions exceeding ₹2,000. This request was made during a hearing on September 28, 2026, where the court sought clarity on the rationale behind the charges, which are set to take effect on October 15. The bench, led by Chief Justice Surya Kant, expressed the need for detailed facts to understand the legal implications of the government's move.

The context of this case stems from a writ petition filed by Advocate Anjan Datta, challenging notifications issued by the Ministry of Finance on September 14 and 15. These notifications announced the imposition of charges on commercial UPI transactions above the ₹2,000 threshold. The Additional Solicitor General, N. Venkataraman, argued that the charges are not a tax or fee but rather a settlement fee between payment aggregators and banks, necessary for maintaining the efficiency of the payment ecosystem.

During the proceedings, Justice Joymalya Bagchi raised questions about the nature of these charges, inquiring whether they constituted a tax or a fee. The ASG clarified that the government would not benefit financially from these charges, emphasizing that they are intended to cover costs incurred by banks during electronic transactions. He noted that while 96% of transactions would not incur these charges, essential services would have a capped fee of ₹5.

The implications of this decision could significantly affect the public, as businesses may transfer the additional costs to consumers. The government's framework allows for Merchant Discount Rate (MDR) charges on specified high-value transactions while ensuring that free UPI payments remain available for individuals and small merchants. This follows amendments to the Payment and Settlement Systems Act, 2007, which were enacted to facilitate these changes.

Looking ahead, the Supreme Court's demand for clarification from the government, Reserve Bank of India, and National Payments Corporation of India will be crucial in determining the future of UPI transaction charges. The court's refusal to stay the implementation of these charges indicates that the legal discourse surrounding this issue is just beginning, with potential ramifications for users and merchants alike as the October 15 deadline approaches.