While various media sources indicated that UPI transactions will be taxed beginning April 1, the NPCI clarified that only a tiny percentage of UPI transactions would be charged.
According to NPCI, an interchange charge for PPI (prepaid payment instrument) business transactions has been implemented, however, customers will not be charged.
The explanation came after media reports said that the NPCI had issued a circular stating that there will be a 1.1% interchange charge for UPI transactions done using PPI devices like wallets or cards. According to sources, this fee would be levied on transactions over Rs 2,000.
What are PPI transactions?
Online wallets (such as Paytm Wallet, Amazon Pay Wallet, PhonePe Wallet, and others) and preloaded gift cards are examples of prepaid payment instruments (PPI).
A PPI payment made over UPI refers to a transaction made through such a wallet using a UPI QR code.
Most UPI transactions are not affected
According to a statement made by NPCI on Wednesday, PPI wallets are now allowed to be a part of the interoperable UPI ecosystem due to updated regulatory requirements.
“The interchange costs imposed are only applicable for PPI merchant transactions and there is no price to customers,” NPCI explained. “It is also stressed that there are no charges for the bank account to bank account-based UPI payments (i.e. standard UPI payments).”
In general, the preferred way of UPI transactions is to link the bank account in any UPI-capable app for payment, which accounts for more than 99.9% of total UPI transactions.
