Yours is a tricky situation. On one side, you need to claim shift allowance, and on the other, you cannot antagonize your manager too. Next time when the topic comes up for discussion, tell him that since this issue is related to payment, it is beyond the scope of your authority. Therefore, it is better if he calls a meeting of all the subordinates who report to you. Let him "tell" them not to claim the shift allowance. During the meeting, if possible, have someone record the voice of the manager surreptitiously on their mobile. Preserve the audio file securely.
Thereafter, make a collective decision. Your team will have the option of abiding by what your manager has said. The second option is to defy the manager. If the collective decision is to go against what the manager has said, then let all the team members submit the application together to the MD of the company. However, route the application through HR.
General comments
This is a common scenario in MSMEs. We do not know the exact nature of the case, but either of the two things is obvious. One is that the manager is under pressure to control operational costs, and for this, he is pressuring his team members to give a week's shift allowance every month. The second could be that the top leadership itself might have told the manager to pass on the instruction. But to avoid direct exposure, the leadership could be instructing through the manager. In either case, such instances vitiate the culture of the company. With a vitiated culture, phenomenal growth is a remote possibility.
Thanks,
Dinesh Divekar