Over 6,000 traders across Karnataka have received GST notices triggered by their UPI transaction data, leading to confusion and frustration. In response, trader associations have called for a bandh on July 25 and urged a boycott of UPI transactions. The notices have created fear among small businesses, many of whom feel blindsided by the sudden action.
Tax Officials Clarify: Notices Are Not Final
Meera Suresh Pandit, Joint Commissioner of Commercial Taxes, clarified that these notices are not final tax demands. Traders have the opportunity to respond with proper documentation. If the transaction data includes exempted goods or services—such as tuition or unbranded food items—the notice will be withdrawn.
She added that crossing the Rs 20 lakh threshold for services or Rs 40 lakh for goods makes GST registration mandatory, as per law.
UPI Is Just an Indicator, Not Sole Evidence
Officials stressed that UPI transactions are only one indicator used by the Service Analysis Wing to flag potential GST defaulters. The data helps identify unregistered traders potentially collecting taxes illegally or bypassing GST obligations. However, the department is open to explanations and offers personal hearings before final assessment.
Critics Call for More Clarity and Education
Trade activist Sajjanraj Mehta criticized the lack of prior awareness and differentiation between exempt and taxable goods. He emphasized that UPI inflows often mix personal and business transactions, and that the current process lacks clarity.
He warned that sudden enforcement is leading some traders to revert to cash-only modes, especially in semi-urban areas.
What Traders Want
- Clear GST guidelines for UPI transactions
- Distinction between taxable and exempt income
- Awareness campaigns in local languages
- A contest mechanism for mismatches
- Grace period before penalties
Conclusion: Need for Balance Between Compliance and Clarity
While the GST department is acting within legal bounds, the rollout of these notices highlights the need for better education, transparency, and phased enforcement. Traders are willing to comply—but not at the cost of confusion and financial distress.
