India’s apex body for FMCG distributors has formally approached PM Modi, fiercely opposing any moves to introduce a Merchant Discount Rate (MDR) on Unified Payments Interface (UPI) transactions.
The All India Consumer Products Distribution Federation (AICPDF), which represents over 4.5 lakh members, warned that imposing even a 0.4% MDR would cause a severe erosion of actual earnings for small retailers and distributors operating on razor-thin margins.
The federation highlighted several critical concerns regarding the proposed tax framework:
Cascading Tax Burden: Calculating MDR on gross payments creates a cascading tax incidence. Since distributors already absorb risks related to inventory, credit, delivery, and collections, applying MDR at multiple stages creates repeated transaction costs within a single supply chain.
Exemption Demand: The association has urged that retailer-to-distributor and distributor-to-company UPI payments must remain completely exempt from MDR to protect the universal acceptance of digital payments.
The ₹1 Lakh Threshold Ambiguity: The AICPDF sought urgent clarity on the proposed ₹1 lakh monthly UPI receipt limit. It remains unclear whether the fee applies only to the amount exceeding ₹1 lakh, to transactions occurring after the limit is breached, or retrospectively to all transactions within that month.
GST Relief: The body has requested a complete GST waiver on MDR and payment-service charges for low-margin small businesses.
National President Dhairyashil Patil emphasized that the financial burden of maintaining UPI infrastructure must not fall disproportionately on traders, but should instead be evenly distributed between consumers and large manufacturers.