Speculation over whether Google Pay, PhonePe and other UPI apps could soon start charging users has intensified after Parliament completed passage of a bill that alters the legal framework governing digital payments in the country. Here is what has actually changed, and whether GPay transactions are set to become chargeable any time soon.
What did Parliament pass?
The Lok Sabha passed the Taxation and Other Laws (Amendment) Bill, 2026 on August 6, moved by Finance Minister Nirmala Sitharaman amid opposition protests over unrelated issues. The Rajya Sabha took up the bill on August 10 and returned it to the Lok Sabha after discussion, completing its passage through Parliament. Since it is a Money Bill, the Rajya Sabha could only recommend changes rather than block it. The bill now goes to the President for assent before it becomes law, and it amends the Payment and Settlement Systems Act, 2007, the Income-tax Act, 2025, and the Finance Act, 2026, alongside a wider set of tax measures unrelated to payments.
Why did this raise fears about GPay charges?
The relevant change concerns Section 10A of the Payment and Settlement Systems Act, 2007. Until now, this section barred banks and payment service providers from levying any direct or indirect charge on digital payment modes notified under Section 269SU of the Income-tax Act, a list that includes BHIM-UPI QR codes and RuPay debit cards. The amendment removes this blanket protection and replaces it with a provision under which the Central government can, through a separate notification, specify which electronic payment modes will continue to remain free of charge going forward.
In effect, Parliament has given the government the legal room to permit a Merchant Discount Rate, the fee banks and payment processors charge for handling digital transactions, on UPI and other notified modes at a time of its choosing. That is the entire operative change. The bill does not itself impose a charge on GPay or any other UPI app; it only removes the existing legal bar against doing so.
So will GPay transactions become chargeable now?
Not immediately, and going by the government's own statements, not for ordinary users at all. Facing pointed questions in both houses over the past week, the Finance Ministry and Sitharaman have repeatedly separated the legal change from any consumer impact. On August 8, the Ministry of Finance said consumers will face no transaction charges for using UPI, and that person-to-person transfers will continue to remain free. The ministry added that if a Merchant Discount Rate is introduced at all, it would apply only to a limited set of merchant transactions above a specified turnover threshold, and at a nominal rate lower than the MDR currently charged on debit or credit card transactions.
Replying to the debate in the Rajya Sabha on August 10, Sitharaman told the House that the amendment is an enabling provision and does not by itself impose any tax or transaction fee on UPI users. She said no MDR framework has been finalised yet, and that consumers and small merchants would not be asked to bear any such charge. So a GPay user sending money to a friend, splitting a bill, or paying a neighbourhood kirana store is not currently looking at any new cost, and the government has said this is by design rather than a temporary gap.
Who decides if and when a charge comes in?
Once the bill receives presidential assent, the decision on whether to actually notify an MDR, and at what rate, will rest with the UPI and Services Steering Committee headed by the National Payments Corporation of India. No such notification has been issued so far, and until one is, GPay and every other UPI app continue to operate exactly as before. The government has framed the amendment as necessary to build a sustainable revenue model for the UPI ecosystem, pointing to continued investment in cybersecurity, fraud prevention and infrastructure as transaction volumes keep growing, with the Ministry of Finance citing UPI processing 2,366 crore transactions worth Rs. 29.9 lakh crore in July alone.
Who would actually end up paying, if anyone?
Industry watchers have read the government's threshold language as a signal that any eventual MDR would target large merchants rather than the small and micro merchants who make up the bulk of UPI's merchant base. The Payments Council of India has previously noted that around 60 million merchants currently accept UPI payments, and that roughly 90 percent of these are small merchants with annual turnover below Rs. 20 lakh, a segment the government has repeatedly said it intends to protect.
Some payment companies, including PhonePe, Razorpay and Pine Labs, have separately backed a merchant-only MDR framework, arguing it would help fund infrastructure and security investment that zero-MDR UPI has not been able to support on its own. Brokerage estimates cited in market reports have suggested a merchant-side MDR could generate additional annual revenue running into thousands of crores for banks and payment companies, though these remain analyst projections rather than any government figure.
The bottom line
GPay transactions are not becoming chargeable for users right now, and the government has been explicit that any future MDR, if it materialises, is designed to sit with large merchants rather than with the person tapping to pay. What Parliament has done is remove a six-year-old legal bar that made such a charge impossible under any circumstances. Whether that changes anything for ordinary users depends on presidential assent, a specific government notification, and a decision from the NPCI-led steering committee, none of which has happened yet.
