GST heat drives Karnataka's small traders away from UPI mode
In Mysuru, small shopkeepers, hotel owners, PG operators, and auto drivers have started declining UPI payments after receiving tax notices. The state's commercial tax department, using cumulative UPI transaction data from the 2022-25 financial years, flagged potential non-compliance—causing panic among merchants unaware that digital inflows could be considered undeclared turnover.
"For years, UPI was the easiest way to get paid," said a hotelier from Bogadi.
"But I can't maintain records for every transaction. I'd rather lose a few customers than deal with GST registration or file returns for a 1% tax under the composition scheme."
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Bengaluru-based trade activist Sajjan Raj Mehta said while the department is within its legal rights to use UPI data, the lack of clarity and warning has led to confusion. "Many traders didn't know mixed personal and business UPI inflows could be treated as turnover.
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The issue isn't enforcement—it's the absence of prior communication." In Bengaluru, the impact is visible. Rekha, a flower vendor near Banashankari metro station, said she stopped accepting UPI after a neighbour received a GST notice.
"Now, customers either leave or argue. My sales have dropped 30% this week." Mehta stressed that notices failed to account for exempt goods. "Fruits, vegetables, and unbranded food items don't require GST registration.
Yet, small traders dealing in them have been pulled into the compliance net." The shift isn't yet widespread but is growing. "In tech-savvy areas, UPI use continues. But rural belts and older vendors are reverting to cash," Mehta noted.
Customers are feeling the pinch. "Three local stalls refused UPI this week—it's frustrating," said Rohit Dubey, a tech worker in Bengaluru. Homemaker Sunitha S added, "This defeats the purpose of Digital India."
Trade bodies are urging the government to intervene. "Traders need clear GST guidelines on UPI, a grievance mechanism for mismatches, and awareness programs in local languages," said Mehta.
While large businesses with turnover above Rs 2 crore remain unaffected, Mehta warned that the move could reverse years of progress. "After pushing digital payments post-demonetisation, we're risking a rollback. If UPI equals tax scrutiny, small businesses will default to cash.
Trust, once broken, is hard to rebuild."
KC Narayana Gowda, president of the Mysuru Hotels Association, called the retrospective notices "highly condemnable." "These should've been issued in the same year. We had to bring in Rs 25 lakh worth of coins to meet demand." KB Lingaraju, president of the Mysuru Chamber of Commerce and Industries, added, "The state must prioritise education over enforcement. Panic won't lead to compliance."
With inputs from Supriya Roy
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