Shillong, Sep 18: The All India Consumer Products Distributors Federation (AICPDF), backed by the Meghalaya Distributors Association, has voiced strong opposition to the proposed Merchant Discount Rate (MDR) on UPI transactions, warning that it will disproportionately impact small retailers, distributors, and low-margin businesses.
In a letter to the Prime Minister, the federation urged the government to retain UPI as a zero-MDR system, arguing that merchants should not be made solely responsible for financing India’s digital payment infrastructure.
The AICPDF highlighted that FMCG retail and distribution operate on extremely thin margins, where a 0.4 percent MDR could significantly erode earnings. It questioned why FMCG was excluded from the flat Rs 5 MDR relief already extended to essential sectors such as fuel, telecom, insurance, railways, and agriculture.
The federation also stressed that B2B payments within the FMCG supply chain – such as retailer-to-distributor and distributor-to-company settlements – should remain exempt, since applying MDR at multiple stages would create repeated transaction costs.
The industry body further raised concerns about the Rs 1 lakh monthly threshold, demanding clarity on its operation and assurance against retrospective liability. It also urged that MDR be calculated on pre-tax transaction values to avoid cascading tax effects, and sought GST relief on MDR.
Emphasising UPI’s role as a transformative national achievement, AICPDF argued that the cost of maintaining the system should be equitably shared across the economy rather than imposed solely on traders, who already face costs in both cash and digital transactions.
