By In a city hailed as India’s IT capital, a surprising reversal is underway—street vendors and small shopkeepers in Bengaluru are increasingly rejecting digital payment methods like UPI and insisting on cash-only transactions. This growing trend stems from fear sparked by recent Goods and Services Tax (GST) notices being served based on digital payment data.
Across the city, stickers reading “No UPI, Only Cash” have become a common sight, from roadside food stalls to neighborhood kirana stores. The reason: many vendors claim to have received unexpected GST notices, some with alleged tax dues running into lakhs of rupees.
The Trigger: Digital Trail Turns into Tax Trap
The root cause of this pushback lies in recent action by Karnataka’s commercial tax department, which has been reportedly issuing notices to small and unregistered businesses. According to vendors, lawyers, and tax experts, these notices were issued based on UPI transaction data dating back to the 2021–22 financial year.
Under GST rules, any business dealing in goods must register if their annual turnover exceeds ₹40 lakh. For service providers, the threshold is ₹20 lakh. Tax officials claim that the digital payment data suggested many vendors had surpassed these limits, making them liable to register and pay GST.
However, several vendors argue that the figures assumed by authorities do not reflect actual business revenue. “Just because someone receives UPI payments doesn’t mean it’s business income,” said a former GST field officer, pointing out that some of these transactions could be personal transfers, informal loans, or help from family members.
Fear, Uncertainty, and Resistance
Vinay K Sreenivasa, advocate and joint secretary of the Federation of Bengaluru Street Vendors Associations, confirmed that the notices have caused widespread panic among vendors. “There’s a real fear of harassment and even eviction,” he said in a statement quoted by The Times of India. As a result, many vendors are now avoiding digital payments entirely to escape further scrutiny.
He added that the approach by authorities lacked nuance. “This one-size-fits-all use of digital data doesn’t capture the informal nature of many of these businesses,” he remarked.
The fear is not just about taxes but also about long-term implications such as legal troubles, seizure of goods, or even closure of business spaces due to licensing violations. Many vendors feel they are being punished for adopting digital payment methods—something the government itself has long encouraged.
Legal Experts Question Methodology
HD Arun Kumar, former additional commissioner of commercial taxes in Karnataka, also criticized the blanket interpretation of digital transactions. “Authorities cannot simply estimate turnover using UPI transaction data. The burden of proof lies with tax officers, and they must clearly establish that the funds are business income,” he said.
He emphasized that GST demands must be based on verified sales records and not assumptions, adding that unlike money laundering cases, tax law requires a stronger evidentiary base for such demands.
Political Response and Revenue Pressure
Opposition BJP MLA S Suresh Kumar has pledged to write to Chief Minister Siddaramaiah to seek a more vendor-friendly resolution. He argues that this crackdown disproportionately affects small, unorganized sellers who form a vital part of the city’s economy.
Meanwhile, the state government faces its own financial pressures. With ambitious welfare schemes worth ₹52,000 crore and growing demands from Congress MLAs for development funds, Karnataka is aiming to collect ₹1.20 lakh crore in GST revenue in 2025–26. Critics argue that this fiscal pressure may be driving aggressive enforcement against small businesses.
A Digital Divide in the Making
The situation in Bengaluru highlights a growing tension between formalization and inclusivity. While the government pushes for a digital economy and higher tax compliance, many on the ground feel they are being penalized for participating.
As vendors retreat from digital payments out of fear, the broader vision of a cashless India may take a hit. Unless addressed with sensitivity and clarity, the ongoing crackdown may not only stall digital adoption but also drive a significant portion of the informal economy deeper underground.
