Tax Department: Switching to cash-only operations does not shield traders from GST compliance

In response to a growing shift by Bengaluru’s small businesses away from digital payments, Karnataka’s Commercial Tax Department has clarified that Goods and Services Tax (GST) notices are not exclusively based on Unified Payments Interface (UPI) transactions. The clarification comes amid widespread concerns that digital payments, especially UPI, were leading to targeted tax scrutiny.

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Recently, a noticeable trend emerged across Bengaluru’s street markets and small shops, where vendors displayed signs declining UPI payments, citing fears of high tax liabilities. The move followed reports of GST notices being issued to businesses that exceed the annual revenue threshold of ₹40 lakh for goods and ₹20 lakh for services. Some traders reportedly received demands amounting to lakhs in taxes, prompting a return to cash-based transactions.

In an effort to dispel the misinformation, the tax department emphasized that GST obligations apply irrespective of the mode of payment. Notices are issued based on the total consideration received for goods or services—be it through UPI, bank transfers, point-of-sale machines, or even cash.

Officials reiterated that switching to cash-only operations does not shield traders from GST compliance.

The statement aims to curb the rising reluctance among small traders to accept UPI, maintaining trust in digital payment systems.