The Supreme Court on Monday refused to stop the government’s plan to charge a fee on large UPI merchant payments, but questioned the legal basis of the levy.

A bench led by Chief Justice Surya Kant declined an interim stay on the 0.4 per cent merchant discount rate for person-to-merchant UPI transactions above 2,000 rupees. The charge takes effect from October 15.

The court issued notices to the Union government, the RBI and the National Payments Corporation of India, asking for replies on affidavit within four weeks. The issue was termed more technical than legal.

Justice Joymalya Bagchi questioned the nature of the charge. ‘It is neither a tax nor a fee… So what is the exigency of making this expropriation?’ he asked the government’s lawyer.

The government said 96 per cent of gateway users are exempt, essential services face a 5-rupee cap, and transactions above 75,000 rupees are capped at 300 rupees. The petition argues the levy could push people back to cash. Why it matters: UPI has been free for nearly six years, and the fee marks a major shift in digital payments.