'GST Overreach?' Karnataka Street Vendors Protest Tax Notices for UPI Transactions Above Rs 40 Lakh

Street vendors and small traders across Karnataka, particularly in Bengaluru, are up in arms after receiving GST notices from the commercial tax department. The notices are reportedly based on Unified Payments Interface (UPI) transaction data showing annual turnovers exceeding Rs 40 lakh, the GST registration threshold.

The vendors, many of whom operate in cash-based, low-margin businesses, say they were blindsided by the move and are demanding immediate relaxation in enforcement. 
They allege they were neither informed nor educated about the GST implications of digital payments.

"Small businesses run with a margin of just 5–10%,” said Abhilash Shetty, a representative of the Karnataka Pradesh Street Vendors Association.

"The GST, penalties, and interest can take up nearly 50% of their revenue, how is that viable? We request the government to intervene and provide relief to these vendors.”

Traders Slam Lack of Awareness
Advocate Shakuntala, the association’s legal representative, questioned the state’s approach in targeting small traders without prior tax education.

"If taxes were to be imposed, why weren’t the vendors educated about it during registration? They should have been made aware of what constitutes taxable turnover and the impact of digital payments,” she argued.

In Haveri, a vegetable vendor named Shankar Gowda Hadim received a Rs 29 lakh tax notice from the Bengaluru Tax Office despite claiming that fruits and vegetables are GST-exempt.

“I never registered for GST because my business only involves vegetables. The officials said if I prove that all my transactions were from vegetables, the notice may be withdrawn,” he said.

Political Fallout: BJP Calls It “Economic Sabotage”
The BJP has seized the moment to launch a sharp attack on the Congress-led state government. On June 16, BJP IT Cell head Amit Malviya posted on social media:

“Congress is destroying small businesses in Karnataka. GST authorities have issued heavy-handed notices to small vendors, many running into lakhs. UPI data is being weaponized. Thousands of traders are abandoning digital payments out of fear. This is economic sabotage.”

He further claimed that the tax enforcement drive is a “desperate attempt to fund Congress’ freebie culture,” and that under GST law, the burden of proof lies with tax officers — not traders.
 

Impact: Traders Abandon UPI
The backlash is already visible on the ground. Several small traders in Bengaluru and beyond are reportedly discontinuing UPI and digital payment options. Many now fear that every rupee transferred digitally could invite scrutiny, even when their goods fall under tax-exempt categories.

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While the government has not yet issued a formal clarification, the protest is gaining ground. Industry bodies and legal experts suggest that unless there’s clearer communication and better awareness around GST compliance in the digital economy, India’s informal sector could be pushed further into the shadows.

(With Inputs From ANI)