Once a stronghold of digital payments, Bengaluru is now witnessing a growing shift back to cash transactions. Small shopkeepers and street vendors across the city are removing QR codes and replacing them with hand-written signs that read “No UPI, only cash.” The switch is being driven by concerns over tax notices and regulatory scrutiny.
Small vendors say UPI payments have drawn GST attention
According to an ET report, several vendors who previously preferred Unified Payments Interface (UPI) for convenience now say digital transactions have brought them under the lens of the Goods and Services Tax (GST) department.
“I do a business of about Rs 3,000 a day and live on the small profit I make. I can’t accept payment by UPI anymore,” said a shopkeeper in Horamavu.
Lawyers, chartered accountants, and vendors told The Economic Times that thousands of unregistered businesses in Bengaluru—including roadside food stalls, push carts, and corner stores—have received GST notices. Some notices include tax demands running into lakhs of rupees.
Vendors fear harassment and eviction
Joint secretary of the Federation of Bengaluru Street Vendors Associations, said many vendors fear being harassed by GST officials. Some are also worried about possible eviction by civic bodies, which has led them to stop accepting UPI payments.
Under current GST rules, businesses involved in supplying goods must register and pay GST if their annual turnover exceeds ₹40 lakh. For service providers, the limit is ₹20 lakh.
GST department says notices are based on data
The commercial taxes department stated that it has issued notices only in cases where UPI transaction data since 2021-22 showed turnover above the GST threshold. The department said such businesses are required to register, disclose taxable turnover, and pay the applicable tax.
However, HD Arun Kumar, former additional commissioner of commercial taxes in Karnataka, noted that the tax authorities must provide evidence before issuing a tax demand. “Under the GST laws, the burden of proof is on officers. They must establish it before arriving at a tax demand, unlike in money laundering cases,” he said.
Political concerns and economic pressure
BJP MLA S Suresh Kumar said he plans to write to Chief Minister Siddaramaiah to raise the issue and seek his intervention.
A former GST field official noted that digital credits do not always reflect business income. “Some of it would be informal loans or transfers from family and friends,” the official said.
Other states may follow Bengaluru’s model
An Chartered accountant said Bengaluru may be just the beginning. “Bengaluru may emerge as a test case. If the GST authorities can net a good chunk of revenue by tapping unregistered vendors, other states too will take the cue as every state is desperate for funds,” he said. “Officials have zeroed in on chat vendors with high business in Mumbai. It’s only a matter of time considering the huge potential tax base,” he added.
Revenue targets add urgency
Karnataka’s tax officials are working under pressure to meet a collection target of ₹1.20 lakh crore for 2025-26. Chief Minister Siddaramaiah is also facing demands to finance welfare guarantees worth ₹52,000 crore and respond to pressure from Congress MLAs seeking funds for infrastructure projects
Source #ET
