Bengaluru GST row: Small-scale traders and merchants in Karnataka have expressed deep concern following the receipt of GST notifications from commercial tax authorities regarding UPI transactions exceeding Rs 40 lakh per year. They have asked the authorities to withdraw these notices and for leniency in enforcing these regulations on small-scale vendors.

The problem arose after it was reported that vendors in Bengaluru are increasingly declining UPI as a payment method, preferring customers to pay in cash instead.

Key Highlights

• About 14,000 Bengaluru traders received GST notices after UPI transactions exceeded ₹40 lakh annual threshold.
• Vendors are abandoning UPI, reverting to cash-only over fear of GST scrutiny and notices.

Shankar Gowda Hadimani, a vegetable vendor from Haveri, expressed his concerns after receiving a tax notice of ₹29 lakh from the Bengaluru Tax Office.

According to an ANI report, he stated, "... Because there are no GST rules on fruits and vegetables, I did not register for a GST number." But I received a notice to pay Rs 29 lakh in taxes on a business worth over Rs 40 lakh... The officials have informed me that if it is proven that I have done so much business with vegetables, the notice will be withdrawn..."

According to Abhilash Shetty of the Karnataka Pradesh Street Vendors Association, "Small businesses operate with a margin of 5 to 10 percent... The tax (GST) combined with other charges, such as penalties, equals 50%, and vendors cannot afford to pay such a high tax. We request that the government intervene and provide relief to the small vendors in this matter..."

Advocate Shakuntala, the association's legal counsel, echoed these concerns while criticising the authorities for failing to adequately inform small vendors about their tax responsibilities during business registration.

She asked, "If taxes are being imposed, why weren't they educated first?... When they registered, they should have been informed of the taxes on the sale of goods and revenue..."

The BJP has criticised the issuance of GST notices for UPI transactions in Karnataka.

Amit Malviya, BJP spokesperson, stated that the Congress is destroying small businesses in Karnataka. In a recent mindless crackdown, Karnataka GST authorities issued heavy-handed notices to small vendors on the pretext of GST evasion, with many costing lakhs of rupees. The data from UPI transactions is being used to issue arbitrary tax demands. As a result, thousands of small traders in Bengaluru are abandoning digital payments completely. This is not simply harassment; it is economic sabotage."

Also Read: SBI: GST on UPI Payments May Push Small Businesses to Use Cash

He went on to say, "Under GST law, the burden of proof is on the tax officer, not the trader." Why, then, is the Congress government imposing this coercion on those who are the foundation of our economy? This is just a desperate attempt to fund their freebie culture. And yet, Rahul Gandhi has the audacity to claim he supports small businesses."