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Last Updated:July 23, 2025, 10:37 IST
From milk booths to vegetable vendors and tea stalls, shopkeepers are switching to cash-only payments overnight due to fear of GST scrutiny

Across Bengaluru, signs have started popping up: “No UPI, Only Cash". (AI-generated image)
Across Karnataka, small traders and workers are increasingly on the edge as a wave of GST notices reaches even the most modest businesses.
“These GST notices… will we also get one? My friend who is a flower seller got one. He doesn’t even have the money to pay it. We work on daily wages, will they come and tax us too?" an auto driver asked News18, voicing a fear that now grips thousands of small traders and workers in the state.
The commercial tax department has been issuing the notices to small businesses—bakeries, flower shops, kirana stores, tea stalls—with some demands running into lakhs and even crores. When explained that the notices were only for those above a particular slab, the auto driver frowned and asked: “I hope they’re not doing this to fund the bhagyas [guarantees]… We’re barely able to make ends meet." His suspicion echoed the sentiment of many who have seen the notices land at their doors, asking them to pay money to the government based on digital transactions alone.
Across Bengaluru, signs have started popping up: “No UPI, Only Cash." From milk booths to vegetable vendors and tea stalls, shopkeepers are switching to cash-only payments overnight due to fear of GST scrutiny.
The Karnataka Karmika Parishath (KKP), a group representing unregistered small traders, has planned a state-wide protest on July 25, demanding immediate withdrawal of the notices. Under president Ravi Shetty Byndur, they have announced a complete shop bandh on July 25, calling the move arbitrary and illegal.
They allege the department has sent retrospective notices for four years, even to those exempt from GST, using UPI data that doesn’t reflect business income accurately.
“Bakery owners, condiment storekeepers—everyone’s got notices. They are threatening to stop the sale of essential goods like milk," said a protestor. UPI records, they claim, include personal and non-commercial payments too. “The department was asleep since 2017. Now they’re waking up and asking for dues," said Shetty.
Kirana store owner Pradeep, who earns just under Rs 14 lakh a year, received a notice claiming he owed Rs 65 lakh in GST. “They said they’d check if it’s a mistake, but until then, I can’t sleep. I have rent to pay, loans to clear, and my home to run," he told News18. Officers told him the demand was based on UPI trail data. Another official said he had no option but to pay because the transactions were all digitally recorded. “We work hard and honestly, and now we are being punished for going digital," he added.
If that wasn’t enough, reports emerged of a small-time vegetable seller from Haveri, Shankargouda Hadimani, who runs a cart near the Municipal High School grounds and had received a GST notice for Rs 29 lakh. His alleged total digital transactions over four years were Rs 1.63 crore, most of it through UPI. He had no idea what to do, and the case has gone viral.
The issue has spiralled but not without the blame-game, with the Congress and the BJP at each other’s throats.
In the middle of the political slugfest are thousands of small traders, hawkers, and vendors—many of whom are now locking up their UPI scanners, switching off their QR codes, and wondering how much their digital transactions and transparency are going to cost them next.
Karnataka’s deputy chief minister DK Shivakumar said the GST problem lies with the BJP government at the Centre. “The Centre fixed the Rs 40 lakh limit. Our GST offices issued notices to over 14,000 traders—including vegetable, flower, and tender coconut vendors. The BJP must withdraw these notices. Rahul Gandhi always opposed GST in this form. The Centre is pressuring states to collect it. Karnataka contributes one of the highest shares to the GST pool, but we don’t want small businesses to suffer," he said. “We have asked for more funds from the Centre for two years, but BJP MPs don’t speak for Karnataka. For every Rs 100 we give, we get just Rs 13 back," he added.
But the BJP has hit right back, saying the Congress was misleading the people of the state.
Union minister for food, public distribution and consumer affairs Pralhad Joshi said the notices were issued by the state and not the Centre. “It is Karnataka’s own commercial tax department that issued these. The state government is pretending to be innocent to avoid blame. If this was a central move, it would’ve happened in other states too. Why only Karnataka?" he asked.
Chief minister Siddaramaiah, who holds the finance portfolio, said he will take up the matter in the next GST Council meeting in Delhi. He instructed the commercial tax department to reach out to affected traders and said that misinformation was being spread.
A top official of the department said the notices are not final tax demands and that they are only asking traders to share transaction details.
The Congress government in Karnataka, having blamed the BJP-led Centre for the tax mess, has launched its own version of the ‘Know GST’ campaign, a state-wide outreach programme to create awareness.
The first workshop was held in Koramangala, Bengaluru, where officials said GST registration is mandatory for businesses with annual turnover exceeding Rs 40 lakh for goods and Rs 20 lakh for services. They claimed they had tracked 14,000 traders using UPI data and sent notices to those crossing thresholds. The department insisted the communications were not final tax demands but a step to verify transactions and register eligible traders.
The traders, however, are furious—not just at the size of the tax demands, but also at being asked to pay arrears for four years without warning. With traders stopping QR payments and shifting to cash, digital transactions across the city have taken a hit.
BJP state president BY Vijayendra alleged that Siddaramaiah was using the GST dues to fill coffers and fund guarantee schemes. “The state is cracking down on small traders and forcing them to cough up old dues with penalties. They’re being pushed to the brink," he said.
The department issued a statement on July 11 claiming that 98,915 taxpayers are registered under the composition scheme. Traders earning less than Rs 1.5 crore a year can opt for the scheme and pay just 1 per cent GST (0.5 per cent SGST and 0.5 per cent CGST).
However, the department added that this scheme doesn’t apply to unregistered turnover. They also cited Section 22 of the GST Act, 2017, which mandates GST registration for anyone exceeding the threshold, regardless of payment mode—cash, UPI, or otherwise. They reiterated that applicable taxes would be recovered from any trader who has received consideration beyond the limits.
A helpline (1800 425 6300) has been set up for complaints, and workshops will expand state-wide. But many traders claim the notices clearly demand tax arrears from 2021–22 onwards, with amounts nearing Rs 40 lakh in some cases.
Byndur, however, dismissed the government’s claim and said officials were threatening traders with penalties going back to 2021–22. He accused the government of trying to divide traders with this campaign just days ahead of the strike.
Former chief minister and Haveri Lok Sabha MP Basavaraj Bommai said the move showed the state’s desperation. “The state treasury is under stress due to shortfalls in the first quarter. These harsh steps have been ordered from the top," he said.
Rohini Swamy, Associate Editor at News18, has been a journalist for nearly two decades in the television and digital space. She covers south India for News18’s digital platform. She has previously worked with t...Read More
Rohini Swamy, Associate Editor at News18, has been a journalist for nearly two decades in the television and digital space. She covers south India for News18’s digital platform. She has previously worked with t...
Read More
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News india 'Punished For Going Digital': Panic In Karnataka As GST Notices Worth Lakhs Haunt Small Traders
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