Bengaluru vendors ditch UPI, opt for cash to escape GST scrutiny

Bengaluru, July 18: In a surprising turn for India's tech-savvy city, a growing number of small vendors in Bengaluru are removing UPI QR codes and insisting on cash payments to avoid tax scrutiny. 

Shopkeepers and street vendors have begun displaying signs reading “No UPI, Only Cash,” driven by fear of receiving Goods and Services Tax (GST) notices linked to digital transaction trails.

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This shift reflects rising concerns among unregistered traders, many of whom earn approximately ₹3,000 per day. Several have reportedly been served GST notices demanding large sums in back taxes—sometimes amounting to lakhs of rupees. Many say they are now reluctant to accept any digital payments, fearing harassment, fines, or even eviction from their places of business.

Advocate Vinay K Sreenivasa, representing the Bengaluru Street Vendors Association, said, “There’s a growing sense of panic among vendors. They're being penalised based on UPI transaction records without understanding the full context of their business operations. These are small traders, not tax evaders.”

The Karnataka Commercial Taxes Department has confirmed that some GST notices were issued based on data from digital payment platforms. Officials maintain the action is aimed at ensuring compliance with GST registration norms, which require businesses dealing in goods with annual turnovers above ₹40 lakh—and those offering services crossing ₹20 lakh—to register and pay tax accordingly.

However, critics argue that this enforcement drive is having unintended consequences. “This clampdown risks reversing years of progress made in digital financial inclusion,” warned a Bengaluru-based policy analyst. “The government needs to ensure ease of compliance for small traders rather than scaring them back to cash.”

The current trend raises concerns that other cities may follow suit, undermining nationwide efforts to formalise the informal sector through digital payments. Stakeholders are now urging a more balanced approach—one that supports the transition to digital systems while protecting the livelihoods of micro-entrepreneurs.

As India continues to push toward a digital economy, Bengaluru’s experience serves as a cautionary tale on the importance of supportive policy frameworks that encourage compliance without triggering fear.