Small traders and street vendors across Karnataka are up in arms after receiving hefty GST notices for UPI-based transactions exceeding ₹40 lakh in a financial year. The development has triggered widespread concern and outrage, with trader associations demanding that the government immediately revoke the notices and provide relief to small-scale businesses already struggling with tight profit margins.
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Vegetable vendor gets ₹29 lakh GST notice
One of the most alarming cases has emerged from Haveri, where a vegetable trader, Shankar Gowda Hadimani, said he was shocked to receive a ₹29 lakh GST notice from the Bengaluru Tax Office. "I never registered for GST because fruits and vegetables are exempt under GST rules. But I’ve now received a notice demanding ₹29 lakh in taxes," he told reporters. "Officials say if I can prove that all of my transactions are strictly in vegetables, the notice may be withdrawn. But how is a small trader supposed to deal with this kind of pressure?"
Vendors argue that they were never adequately informed about the tax implications of crossing the ₹40 lakh annual threshold via digital transactions, especially through platforms like UPI.
{{/usCountry}}Vendors argue that they were never adequately informed about the tax implications of crossing the ₹40 lakh annual threshold via digital transactions, especially through platforms like UPI.
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Abhilash Shetty, representing the Karnataka Pradesh Street Vendors Association, said the government’s approach is unfair to small businesses operating on razor-thin margins. “Most of these traders run on 5 to 10 percent margins. When you include GST and penalties, the tax burden becomes nearly 50 percent — that's unsustainable. We urge the government to step in and grant immediate relief to these small vendors,” Shetty said.
Echoing the frustration, Advocate Shakuntala, the association’s legal advisor, questioned the government’s role in educating newly registered vendors about GST obligations. “If the tax department intended to collect GST, why weren’t these traders properly informed at the time of registration? They had no idea that crossing a certain limit in UPI transactions could lead to such heavy liabilities,” she said.
The controversy has also triggered a political backlash, with the BJP accusing the ruling Congress government of targeting vulnerable sections of the economy. BJP IT cell chief Amit Malviya, in a statement on June 16, slammed the move as "economic sabotage," claiming that the Karnataka government was using UPI transaction data to raise arbitrary tax demands.