25/07/2025
No UPI, Only Cash.
Karnataka's tax department just pulled transaction data from PhonePe, Google Pay, and other UPI apps spanning 5 years. The investigation revealed 14,000 businesses crossing GST thresholds without registration.
The backlash was immediate. Traders called a complete bandh on July 25, shutting down milk vendors, bakeries, and paan shops across the state.
Now here's the real shock - they've abandoned UPI payments entirely. Cash only, no exceptions.
Under GST Act Section 22, businesses must register once they hit ₹40 lakh turnover for goods or ₹20 lakh for services. These UPI transactions alone showed they crossed limits, meaning their actual income was much higher.
But traders argue their margins are already too low, and Tax should target actual business income, not random transaction amounts.
Karnataka missed its tax collection target by 10% last year - ₹1.72 lakh crore against ₹1.9 lakh crore target. Despite this shortfall, they set an even higher goal of ₹2.1 lakh crore this year.
Officials claim this could bring 1 lakh new GST registrations and ₹10,000 crore revenue. Sounds like a convenient shortcut to hit those targets.
The ripple effect is spreading fast. Four states - Andhra Pradesh, Uttar Pradesh, Tamil Nadu, and Gujarat - have already requested similar merchant data from UPI platforms.
What started as Karnataka's tax drive is becoming a nationwide digital audit. Every swipe, every scan, every payment - all permanently recorded and ready for scrutiny.
Small businesses thought they were just embracing convenience. They didn't realize they were creating their own investigation files.
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