Chennai: A day after the announcement of a 0.4% MDR on select UPI transactions, city traders expressed concern that the cost could eventually be passed on to customers.Large retailers said they could absorb it as the charge was too small to affect prices. Retailers in some sectors, however, said they were awaiting clarity on how the new rules would apply to them.A M Vikramaraja, president of the Federation of Tamil Nadu Traders’ Association, said the new charge would add to the financial pressure on traders already struggling with multiple regulatory and operating costs. “We will not pay the tax from our pocket. We will recover it from customers. We will stop encouraging digital payments and insist that they pay in cash,” he said.Vikramaraja said traders were already facing pressure from compliance requirements, including GST, FSSAI, city corporation regulations and labour department rules. “We are already on the verge of surrendering to corporates. Today, the government says there is no charge for UPI transactions up to ₹2,000. What is the guarantee that smaller transactions will not be charged in the future? How are small traders expected to do business?” he asked.Large retailers, however, said the 0.4% MDR was too small to warrant passing the cost on to customers. They pointed out that UPI, along with credit and debit cards, had become deeply embedded in retail transactions after demonetisation and had since spread to smaller towns.“We do not have the right to ask a customer to use another mode of payment if they prefer UPI. The MDR of 0.4% is too small to have an impact. We will absorb it; it will not be passed on to customers,” said Ramesh Pothy, managing director, Pothys.The National Payments Corporation of India (NPCI) announced on Sept 15 a Merchant Discount Rate (MDR) for select UPI transactions. From Oct 15, a 0.4% MDR will apply to person-to-merchant (P2M) UPI transactions above ₹2,000, subject to a maximum charge of ₹300 per transaction. The framework keeps person-to-person payments free, while small merchants covered under the P2PM category will continue to enjoy zero MDR. The charge is a fee within the digital payments ecosystem, not a tax collected by the govt. The govt has also said customers should not be charged separately for making UPI payments.M Ravi, president of the Chennai Hotels Association, said the impact would be felt by businesses of different sizes, even as hotels preferred UPI because payments went directly into their bank accounts.“When customers pay in cash, we have to take it to the bank the next day. UPI is convenient because the money goes directly into our accounts. But we already pay around 2% when purchasing a UPI machine, apart from GST. Why should there be another charge? This will affect many businesses,” he said. “The government sometimes takes decisions without considering the difficulties faced by businesses,” he said.Some retailers said they were yet to understand the details of the announcement. “Most of our customers prefer card payments. This is a new announcement, and I do not know the details yet,” said Nalli Kuppuswami Chetti, chairman, Nalli Silks.
