Bengaluru’s small vendors are ditching UPI payments amid GST scrutiny and tax notices
1. From Digital Pioneer to Cash Comeback: What’s Happening in Bengaluru?
No UPI Only Cash – In Bengaluru, small vendors are ditching UPI and reverting to cash payments amid fears of GST scrutiny. Handwritten signs reading “No UPI, Only Cash” are replacing QR codes, as unregistered businesses face tax notices based on digital transaction data. The shift reflects growing anxiety over regulatory overreach.
Once hailed as India’s digital payments capital, Bengaluru is now witnessing a quiet rebellion. Small vendors from tea stalls to pushcart sellers are removing QR codes and replacing them with signs that read “No UPI, Only Cash”.
Table of Contents
What triggered this shift?
- Thousands of unregistered businesses received GST notices based on UPI transaction data
- Some vendors faced tax demands running into lakhs of rupees, despite modest daily earnings
- Fear of harassment and eviction by civic authorities has pushed many to revert to cash
This backlash is especially striking in a city that once led India’s digital transformation. The move signals a growing tension between financial inclusion and regulatory enforcement.
2. GST Scrutiny & Vendor Anxiety: The Heart of the Crisis
Under current GST laws:
- Businesses selling goods must register if annual turnover exceeds ₹40 lakh
- Service providers must register if turnover exceeds ₹20 lakh
Authorities used UPI transaction data from FY 2021-22 onward to identify vendors who may have crossed these thresholds. But vendors argue:
- Not all UPI credits reflect business income, some are personal transfers or informal loans
- Tax officials are allegedly assuming turnover without proper verification
- The burden of proof lies with officers, who must establish taxable income before issuing demands
Advocate Vinay K Sreenivasa, joint secretary of the Federation of Bengaluru Street Vendors Associations, said the sudden notices have triggered widespread fear and confusion.
3. Political Pressure & Revenue Targets: The Bigger Picture
Karnataka’s tax authorities are under pressure to meet a ₹1.20 lakh crore revenue target for FY 2025-26. With ₹52,000 crore in welfare guarantees and rising infrastructure demands, the government is looking for new revenue streams.
This has led to:
- Aggressive scrutiny of digital transactions
- Targeting of unregistered vendors as potential tax contributors
- Political pushback, with BJP MLA S Suresh Kumar urging CM Siddaramaiah to intervene
Experts warn that Bengaluru may become a test case for similar crackdowns in other states. If successful, this model could be replicated nationwide, potentially stalling India’s digital payment momentum.
4. What This Means for India’s Digital Future
The retreat from UPI isn’t just a local issue, it’s a national wake-up call. While digital payments offer transparency and convenience, they also expose small businesses to regulatory vulnerabilities.
Key concerns:
- Trust deficit between vendors and tax authorities
- Lack of clear guidelines on differentiating business vs personal UPI receipts
- Need for accessible compliance pathways, like the GST Composition Scheme
Chartered accountants and civil society groups are calling for:
- Compassionate enforcement
- Transparent dialogue between traders and regulators
- Policy reforms that protect small vendors while promoting digital adoption
Because when innovation meets fear, progress stalls.
Final Thoughts
Bengaluru’s “No UPI, Only Cash” movement is more than a payment preference, it’s a cry for clarity, fairness, and trust. As India pushes toward a cashless economy, it must ensure that digital inclusion doesn’t become digital intimidation.
The solution isn’t to abandon UPI, it’s to build a system where small vendors feel safe, supported, and empowered. Only then can India truly unlock the promise of its digital revolution.
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