UPI Payments at Petrol Pumps: What You Need to Know

For quite some time now, buying fuel through UPI was effortless: scan the code, enter the amount and drive off. Now this convenience is about to see a change due to new merchant-side UPI fees on certain high-value transactions, which include fuel transactions, basically UPI charges on petrol pump will be implemented.

What is crucial for motorists is the fact that these are not just new charges that customers have to pay.

What Is Changing at Petrol Pumps?

In the revised structure, UPI transactions over ₹2,000 would usually involve a Merchant Discount Rate. Fuel transactions exceeding ₹2,000 come under a certain flat rate of ₹5 MDR per transaction. It needs to be noted that MDR is not a tax charged from the customers.

The difference comes into play when people use phrases like UPI charges or UPI tax. MDR is just a payment cost for merchants and is not an additional tax imposed on all users of UPI.

For petrol pump customers, the problem lies in the fact that some fuel retailers have expressed their intention to not allow the use of UPI for transactions worth more than ₹2,000.

Does This Affect the UPI Transaction Limit?

No. A transaction UPI limit and the merchant accepting the form of payment are two separate things altogether.

The UPI transaction limit per day on UPI is based on the relevant transaction category and the regulations by banks/NPCI. The implementation of a new MDR regime does not mean that your transaction limit has automatically been reduced to ₹2,000.

In the same way, the introduction of a new UPI rule regarding merchant fees for UPI payments should not be confused with the maximum transaction amount.

Ensure that you have another mode of payment ready before making large fuel transactions.

Why Is the Size of UPI Important?

This discussion is important because UPI is no longer an obscure payment system. UPI was able to process 24,161.69 crore transactions worth around ₹314.23 lakh crore during FY2025-26.

When transaction charges get modified, even a small MDR becomes economically important due to the high volume of transactions.

It is also possible to find products like credit line on UPI, showing that UPI is evolving into something more than just a payment service between accounts.

And now you're probably thinking what does UPI stand for, which means Unified Payments Interface.

What About SBI UPI and Other Bank Apps?

It does not matter whether you use SBI UPI or any other app linked to your bank account for making transactions through UPI because what counts is the payment structure and merchant regulations.

The difference here is the consumer fee and the merchant discount rate charged in the payment system. The current government guidelines clearly state that the consumer must not be directly charged with MDR.

Before you think that making a payment using UPI at the petrol pump will incur an additional cost for you, know whether this cost is yours or of the merchant.

What Should Petrol Consumers Do?

For small-time petrol purchases less than ₹2,000, the merchant UPI payments will still fall within the zero-MDR zone, but for specified transactions of more than ₹2,000, the new scheme will come into effect.

In other words, do not mix up the two: merchant fee with the individual UPI fee; and payment ceilings with MDR limits.

While PrimeScore normally assists the consumers in getting the bigger picture about their financial health, UPI seems to be gaining a foothold in the larger finance ecosystem.

Follow relevant UPI regulations, know the amount of the payment before scanning, and keep another mode of payment handy.

FAQs

1. Will petrol pumps charge customers ₹5 for UPI?
   MDR is a merchant-side charge and is not supposed to be directly passed to customers.

2. Does the ₹2,000 threshold mean my UPI limit is ₹2,000?
   No. The MDR threshold and your UPI transaction limit are different things.

3. What was UPI's FY2025-26 transaction value?
   UPI processed approximately ₹314.23 lakh crore in transactions during FY2025-26.

4. Is UPI tax the same as UPI MDR?
   No. MDR is a merchant discount rate, not a government tax.

5. Can petrol pumps stop accepting high-value UPI payments?
   Some dealers have announced or threatened restrictions on payments above ₹2,000 in response to the MDR framework.