In a major push to widen the tax base and boost GST collections, the Bengaluru government has started leveraging Unified Payments Interface (UPI) data to detect unregistered traders who have crossed the GST threshold but failed to comply with registration requirements.
The commercial taxes department has issued notices to around 14,000 traders who were found accepting large volumes of payments via QR codes and UPI, without having GST registration. Authorities found these businesses had turnover exceeding the mandatory threshold of Rs 40 lakh for goods and Rs 20 lakh for services, but continued operations outside the tax net.
"This is not just about revenue collection but ensuring fairness in the system," said Vipul Bansal, Commissioner of Commercial Taxes. "Those evading taxes should follow the same laws as compliant traders."
Currently, Karnataka has over 10.3 lakh GST-registered traders and officials estimate that the ongoing drive will bring in another one lakh businesses, significantly improving compliance and pushing the state closer to its commercial tax target of Rs 1.2 lakh crore for FY25. So far, only Rs 26,241 crore has been collected - a 13% shortfall, making enforcement critical.
Small Traders Raise Concerns
While the initiative has been welcomed in principle, small businesses, particularly kirana stores, bakeries and vegetable vendors, have expressed anxiety over retrospective tax demands. Several have reportedly received notices asking for GST dues dating back to 2021, with tax liabilities amounting to Rs 40-50 lakh, a sum many find unmanageable in a lump sum.
Trade activist Sajjan Raj Mehta acknowledged the government's intent but warned against misuse of enforcement powers.
"Most traders identified through UPI are micro-entrepreneurs. The government must ensure that genuine cases are treated with sensitivity and not subjected to undue harassment."
Traders have also argued that not all UPI transactions are business-related, pointing to personal payments, reimbursements or family fund transfers. Officials clarified that only those receiving Rs 40 lakh or more through UPI were targeted and that this likely underrepresents actual turnover, which may include cash and card sales.
Govt Promises Support and Installment Options
The government has emphasized that the drive will remain fair and transparent. BT Manohar, a member of the Karnataka GST Advisory Council, noted the positive impact on awareness.
"Many traders are now becoming more aware of GST laws. If someone has received personal UPI payments, they must be given a chance to explain."
The department also clarified that hawkers and sellers of exempted goods, like bread, remain outside the GST ambit and scrutiny will focus on taxable goods, including those in the 5% GST slab, such as spices and condiments.
Bansal assured traders that the department would provide hearing opportunities and allow payment of arrears in instalments for genuine cases.
"We are here to support honest taxpayers. If a trader is unable to pay their dues in one go, the law allows staggered payments. Our aim is compliance, not coercion."
As the digital footprint of businesses grows, this move marks a shift in how tax authorities use technology and fintech tools like UPI to bring informal sector players into the formal tax system, a move that could add Rs 10,000 crore to the exchequer.
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