Bengaluru small vendors are saying 'NO' to UPI, demands 'Only' cash, are in fear due to...

Bengaluru's small vendors, including street food sellers, corner shop owners, pushcart vendors, are now refusing to accept UPI payments, removing QR codes and are opting for cash transactions. Many small vendors across the city have started putting up signs on their shops, that read " No UPI, Only cash'. But why?

The vendors are fearing the looming tax trouble and scrutiny. The vendors who once saw UPI, digital payments as convenient, are now scared as they fear they have to pay taxes in huge amount or will face harrasment. Thousands of small, unregistered businesses have receive Goods and Services Tax (GST notices), based on their UPI transactions data from last few years, as per reports. the GST notices states that they have crossed tax threshold but did noy registered themselves and have not paid the GST.

What are the GST rules?

As per GST rules, Goods selling business have to register and pay tax if their annual turnover crosses Rs 40 lakhs, while service business have to pay tax, if they cross Rs 20 lakhs. Tax authorities have clarified that notices were sent to only those vendors whose UPI transaction data since 2021-2022, indicated turnover beyond the set limit. The commercial taxes department said such businesses are required to register, disclose taxable turnover, and pay the applicable tax.

However, many vendors has claimed that saying UPI transactions as income is wrong. As per report, Shankar, a shopkeeper in Horamavu said, "I make only around ₹3,000 a day. I earn a small profit to run my family. Now I’m scared to use UPI because it may get me into tax trouble. BJP MLA S Suresh Kumar said that he will write to Chief Minister Siddaramaiah, on this matter.

What are experts saying?

“GST officers cannot assume turnover just from UPI credits. They need solid proof before sending tax demands,” said HD Arun Kumar, former additional commissioner of commercial taxes in Karnataka. “Not every UPI payment is business income. Some could be personal transfers, loans, or help from family,” he added.

Chartered accountant Sreenivasan Ramakrishnan of Sreeni & Associates said “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. 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."

Tax officials issuing notices to small vendors as Karnataka government is under pressure to collect Rs 1.20 lakh cror mssive tax for 2025-26, and raise revenue. However, state has to ensure funding welfare gurantess worth Rs 52,000 crore.