Bengaluru: A wave of GST notices has triggered panic across Karnataka’s small business community, with many shopkeepers, vendors, and daily wage workers ditching digital payments overnight. From tea stalls and milk booths to flower sellers and vegetable carts, fear is mounting over retrospective tax demands, some running into lakhs—even crores.
Across the state, handwritten signs declaring “No UPI, Only Cash” are now common, as traders flee from digital transactions they once adopted for convenience and transparency. The root of this panic: GST notices sent by the state’s Commercial Tax Department, using UPI trail data to identify unregistered traders.
“We’re being punished for going digital,” said Pradeep, a kirana shop owner earning under ₹14 lakh a year, who received a GST notice demanding ₹65 lakh. “They claim it’s a mistake, but how do I sleep with this hanging over my head? I have a family to feed, loans to pay, and no clarity.”
In a viral case, Shankargouda Hadimani, a vegetable vendor in Haveri, received a notice for ₹29 lakh based on ₹1.63 crore in UPI transactions over four years. “How is a cart vendor supposed to pay this?” asked a fellow trader. “We survive on daily sales.”
The Karnataka Karmika Parishath (KKP), a union representing unregistered traders, has called a statewide bandh on July 25, demanding the immediate withdrawal of the notices. KKP president Ravi Shetty Byndur called the move “arbitrary, illegal, and anti-poor,” accusing authorities of targeting even exempt businesses with notices backdated to 2021. “UPI data includes personal payments too—this is not real business income,” he said.
The Congress-led Karnataka government has blamed the Centre’s GST framework, saying the threshold of ₹40 lakh for registration was set by the Union government. Deputy Chief Minister DK Shivakumar accused the BJP of creating a financial trap for states. “Our GST offices issued notices to 14,000 traders, but the Centre forced our hand. We contribute heavily to the GST pool but get very little in return,” he said.
Meanwhile, Union Minister Pralhad Joshi has rubbished these claims, stating the notices were entirely issued by the state’s own tax department. “If this was a central policy, why is it happening only in Karnataka?” he asked.
Chief Minister Siddaramaiah, who also handles the finance portfolio, said the issue will be raised in the upcoming GST Council meeting. He has directed the tax department to engage with affected traders and clarify that the notices are not final demands but calls for information.
Yet, small businesses remain unconvinced. Many are already dealing with rent arrears, loan burdens, and inflation. The threat of retrospective tax penalties only adds to the strain.
In response to the outrage, the state has launched a ‘Know GST’ campaign to spread awareness about registration thresholds—₹40 lakh for goods, ₹20 lakh for services. Officials insist the notices are part of a data verification exercise, and those earning under the limit can opt into the Composition Scheme, paying just 1% GST.
But trust is low. “They say this is just an inquiry, but the notice clearly says I owe ₹40 lakh from 2021–22,” said another trader in Basavanagudi. “Now they want us to attend workshops when our businesses are dying?”
Former CM Basavaraj Bommai and BJP state president BY Vijayendra alleged the Congress government is using tax harassment to fund its guarantee schemes. “The treasury is empty, and small traders are the scapegoats,” Vijayendra said.
With less than a week to go for the protest, Karnataka’s small traders are united by fear and uncertainty. As QR codes are turned face-down and UPI apps go silent, a once-celebrated push for digital India faces an unexpected backlash—from the very base it aimed to empower.
