Is It Legal? Petrol Pumps, Traders to Refuse UPI Payments Above Rs 2,000 From Oct 16 Over 0.4% MDR
The Madhya Pradesh Petroleum Dealers Association has announced that its members will not accept UPI payments above Rs 2,000 from October 16, citing the 0.4 per cent Merchant Discount Rate (MDR) proposed on such transactions.
Association president Ajay Singh said the body has written to its State-Level Coordinator (SLC) regarding the government’s decision that an MDR of 0.4 per cent will be levied on UPI transactions above Rs 2,000 from October 16. “The situation is that, on average, around 100 customers at each petrol pump make transactions above Rs 2,000. This will result in a loss of around Rs 590 per day, which comes to approximately Rs 17,700 per month,” Singh said.
He added that petrol pump dealers operate on a profit margin of around 0.5 per cent and therefore cannot absorb the additional expense. Singh also urged the government to extend to UPI payments the MDR exemption that petrol pumps already enjoy on credit and debit card transactions.
Can businesses refuse UPI payments?
A large number of merchants, including fuel pumps, grocery stores and local traders across Delhi-NCR and Ghaziabad, have started putting up “Cash Only” or “No UPI” signs. Legally, this is not a violation. Cash remains the primary legal tender in India, and while the government actively promotes a digital economy, private shopkeepers and merchants are not legally required to accept UPI or other digital payment methods.
The only exception applies to large commercial entities with an annual turnover above ₹50 crore, which are required under tax laws to offer at least one digital payment option. For standard retailers, local vendors and small businesses, the choice of payment methods to accept rests entirely with them.
What the new UPI rule says
From October 15, a 0.4 per cent Merchant Discount Rate (MDR) will apply strictly to specified Person-to-Merchant (P2M) transactions exceeding ₹2,000. The fee is capped at a maximum of ₹300 per transaction.
Regular consumers will not pay any fee for making UPI payments, and all standard Person-to-Person (P2P) transfers remain free. Small merchants earning up to ₹1 lakh per month through eligible UPI QR codes are exempt from the framework, in order to protect local businesses.