Bengaluru, once synonymous with the digital payments revolution, is witnessing a surprising trend: a resurgence of cash transactions. Shopkeepers and vendors are increasingly refusing UPI payments, driven primarily by the tax department’s crackdown. The tax authorities have identified approximately 14,000 merchants based on their UPI transactions who lacked proper registration. Many of these merchants have now received notices regarding outstanding tax dues from the financial year 2021-22.
This reluctance to use UPI is rooted in fear of receiving tax notices. The Commercial Tax Department scrutinized UPI transactions and identified around 14,000 traders who were accepting digital payments without being registered.
Previously, UPI was widely accepted by both small and large vendors throughout the city. Now, signs reading ‘Only cash, no UPI’ are appearing everywhere.
The tax department’s actions were prompted by an analysis of digital transactions, which revealed that many traders exceeded the mandatory GST registration threshold. Businesses with annual turnovers exceeding Rs 40 lakh (goods) or Rs 20 lakh (services) are required to register for GST.
Many traders have been issued notices for unpaid taxes, some amounting to substantial sums, creating an atmosphere of unease. This has led many sellers to avoid UPI, as they fear their digital records will trigger further tax scrutiny.
Tax and legal experts are skeptical about using UPI transactions as the sole measure of income. The government seeks to increase revenue, with the Karnataka government aiming to collect Rs 1.2 lakh crore in taxes by 2025-26, with over Rs 52,000 crore allocated to social welfare. MLAs are also seeking additional funds for infrastructure, making efforts to expand the tax base crucial.
In response to the growing discontent among traders, the government has launched an ‘Know GST’ awareness campaign to educate traders and alleviate their concerns. The first workshop for this campaign took place in Koramangala, Bengaluru.