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The government is considering the possibility of introducing merchant charges on UPI and RuPay powered debit cards for big merchants. This suggestion could extend to merchants whose annual turnover is more than Rs. 40 lakh as per their GST returns, according to a report by Economic Times. Merchant Discount Rates (MDR) were earlier withdrawn by the government in 2021-22 to boost digital payments. This step had led to the increased usage of UPI and RuPay debit cards for retail purchases. However, after the UPI has become the preferred means of payment and RuPay card has received a boost, the government is planning to reintroduce MDR for big merchants. The basis of this suggestion is that many merchants with card machines currently pay MDR for the transactions made through Visa and Mastercard. The stakeholders of the industry claim that the large merchants are causing a huge revenue loss due to the free access to UPI, although the government is providing subsidies to banks and fintech companies that process these transactions. Also, the government has cut its subsidy for UPI payments in the Union Budget 2025 from more than ₹3,500 crore in the year ago to ₹437 crore this year, which only adds to the issues facing the stakeholders. The government is thinking of having a tiered pricing system in which bigger merchants will be made to pay more charges and smaller merchants can still enjoy free UPI transactions if their turnover is less than ₹40 lakh.

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