The Karnataka Commercial Tax Department has begun issuing GST demand notices to traders with annual turnover above ₹40 lakh via UPI payments, raising concern among small traders and shopkeepers in Bengaluru.
Some shopkeepers have responded by removing UPI QR code stickers from their premises and opting for cash-only transactions.
GST Notices on ₹40 Lakh+ UPI Turnover Spark Concern Among Bengaluru Traders
Dipu Nair shared on X: “Early morning shocker!! Laundry guy called me to tell me that he no longer accepts UPI payments… He will only accept cash…”
Vipul Bansal, Commissioner of Commercial Taxes in Karnataka, said, “We have identified 14,000 cases so far. Notices are being issued to those with UPI receipts above ₹40 lakh. Field officers are verifying how many are registered and compliant.”
The department collected transaction data from UPI service providers for the financial years 2021–22 to 2024–25.
As per reports, on July 11, these notices target traders who earned over ₹40 lakh annually through UPI but did not comply with GST requirements.
The tax department clarified that GST applies to taxable turnover regardless of whether payments are made via UPI or cash.
Bansal stated there is no reason for panic: “Right now, only notices have been sent. Let people come forward and explain. Depending on their situation, we will decide. If someone deals only in exempt goods or is under the composition scheme, the tax implication is minimal.”
UPI QR codes gained massive popularity among shopkeepers due to factors like the pandemic, lack of change, and customer incentives such as rewards and cashbacks.
While some merchants are shifting back to cash, Bansal pointed out that customer behavior is a strong force: “The UPI revolution was driven by consumers, not traders. If one trader refuses UPI, another will accept it — because the demand comes from the customer.”
One Lakh Karnataka Traders Pay 1% GST Under Composition Scheme
Bansal added that around one lakh traders in Karnataka already pay just 1% GST under the composition scheme. “It is only fair to ensure others also follow the law… The law must be implemented — not selectively ignored.”
Karnataka accounted for 7.73% of India’s total UPI transactions in May, ranking second after Maharashtra (13.19%).
Shopkeeper Sudhakar Sheenappa Shetty from North Bengaluru, who received a notice, said he’s coordinating with other shopkeepers to approach the government. “We continue to allow UPI payments. Customers want UPI. We will see how this can be worked out.”
Some social media users supported the crackdown, noting that individuals transacting ₹50 lakh or more via UPI are not small vendors and may be operating multiple QR codes. One post stated, “I am happy the GST department has finally woken up. #UPI payment.”
However, other customers expressed concern that such measures could push vendors to prefer cash, making transactions less convenient for consumers.
Many users said they had to visit ATMs for the first time in years to withdraw cash due to shops rejecting UPI payments.
X user Shivaraj Kumar wrote, “The GST department is issuing notices to small vendors for tax payment based on UPI transactions. Already, I am seeing a trend in vendors asking for cash instead. This could be a big hurdle for UPI henceforth.. just beginning.”
In a previous case in 2023, officials discovered 30 UPI QR codes and transactions amounting to ₹1.47 crore at a popular biryani outlet in Hoskote near Bengaluru.
