A significant shift is occurring in Bengaluru’s payment landscape, with shopkeepers increasingly rejecting UPI payments in favor of cash. This is a reversal from the city’s earlier embrace of digital transactions. The primary driver of this change is the tax department’s actions, which have targeted merchants based on their UPI payment records. The authorities have identified approximately 14,000 businesses that were not registered for GST, and have issued notices for outstanding tax payments, primarily relating to the 2021-22 financial year.
Many shopkeepers and vendors are now wary of accepting UPI payments due to concerns about attracting tax department scrutiny. The Commercial Tax Department recently analyzed UPI transaction data and identified around 14,000 traders using digital payments without proper registration.
The trend of accepting UPI, common among small and large traders, from vegetable carts to small shops, has reversed. Boards reading “Only cash, no UPI” are now commonplace.
The fear stems from the tax department’s analysis of digital transactions, which revealed that many traders surpassed the threshold requiring GST registration. Businesses with turnovers exceeding Rs 40 lakh for goods and Rs 20 lakh for services are required to register.
Media reports indicate that many traders have been issued notices for back taxes from the 2021-22 fiscal year, with some asked to pay substantial amounts. This has resulted in widespread concern, prompting sellers to avoid UPI payments to prevent potential tax audits.
Experts in tax and law caution against using UPI transactions as the sole basis for income assessment. The Karnataka government’s aim to collect Rs 1.2 lakh crore in taxes by 2025-26, with over Rs 52,000 crore dedicated to social welfare programs, is driving efforts to expand the tax base.
In response to these developments, the state government initiated the ‘Know GST’ awareness campaign. The aim is to educate traders about GST rules and mitigate their apprehension. The first workshop took place in Koramangala, Bengaluru.