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Karnataka’s UPI Audit Triggers 14,000 GST Notices and Cash-Only Backlash

Traders are planning a statewide bandh on July 25 to protest GST demands based on UPI transaction data.

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UPI payments decline as vendors face GST pressure in Bengaluru.
Bengaluru's small businesses are urged not to abandon UPI payments due to GST fears. (iStockphoto)

Overview

  • Karnataka’s Commercial Taxes Department issued roughly 13,000–14,000 show-cause notices to unregistered small vendors after analysing UPI records that indicated turnover above the ₹20 lakh service and ₹40 lakh goods thresholds.
  • Many Bengaluru vendors have replaced QR codes with “No UPI, only cash” signs to avoid digital trails following notices demanding back taxes running into lakhs of rupees.
  • The department clarified that GST liability applies to all payment modes and that refusing UPI does not exempt traders from tax obligations under the GST Act.
  • Trader associations have called a statewide bandh on July 25 to oppose what they describe as excessive, data-driven tax demands on micro-enterprises.
  • Other states are preparing to replicate Karnataka’s UPI-based enforcement approach as the department races to meet its ₹1.20 lakh crore revenue target for 2025–26.