Why Some Bengaluru Vendors Are Saying No to UPI: The GST Factor

Highlights

In Bengaluru, a growing number of shopkeepers are declining UPI payments amid concerns over possible tax notices and scrutiny from the GST department. Vendors across the city have displayed signs reading “No UPI, Only Cash” as they urge customers to pay in cash instead.

A recent report by the Economic Times reveals that several small vendors, including roadside shop owners, have been served with GST notices, some demanding payments in the range of several lakhs. This development has sparked concerns among traders, who fear potential harassment from tax authorities and even possible eviction.

According to the rules

According to prevailing GST regulations, involved in the supply of goods must register for GST and remit applicable taxes if their annual turnover exceeds ₹40 lakh. For service-oriented businesses, this threshold stands at ₹20 lakh.

The commercial taxes department has stated that it issued notices solely to entities whose UPI transaction data, starting from FY 2021–22, reflected turnover beyond the prescribed limit. It reiterated that such entities are obligated to register under GST and comply with all tax-related requirements

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When it comes to GST, officers have to show evidence before asking for taxes — it’s not like money laundering cases where the person has to prove they’re innocent.

Chief minister statement

People are worried that if Bengaluru’s tax department manages to collect a lot from small shopkeepers, other states might start doing the same. Bengaluru here’s why, Karnataka needs to raise ₹1.20 lakh crore in taxes next year. That’s a huge ask, especially when the Chief Minister, Siddaramaiah, has already promised ₹52,000 crore in welfare schemes—and now his own party’s MLAs are pushing for better roads, buildings, and infrastructure too.

Tax Department Responds to Public Queries

According to a PTI report, the Tax Department clarified that GST notices are not triggered solely by UPI transactions. Authorities assess total turnover from all payment modes — including POS machines, bank transfers, digital payments, and cash. Officials emphasized that opting out of UPI does not shield traders from GST obligations.

Just paying with UPI doesn’t mean you’re being targeted for GST. The department clarified that GST applies to all payments — UPI, cash, card, or otherwise. UPI is simply a payment method. What matters is whether you received money for goods or services, and if so, the tax will be collected accordingly.