GST Applicability on UPI Transactions : KCCI

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Mangaluru : Kanara Chamber of Commerce and Industry (KCCI), Mangaluru, Karnataka – In response to concerns raised by unregistered traders regarding GST enforcement based on Unified Payments Interface (UPI) transactions, the Karnataka government has organized “Know GST” awareness workshops across the state to raise awareness about the requirements of GST compliance and to resolve the existing confusions. As part of this campaign, workshops have already been conducted in Bangalore city. Senior officials of the department have informed that such workshops will be extended to other regions, including the Mangalore division, under the supervision of senior officials of the Commercial Taxes Department.

As per the GST law, traders who have turnover of more than ₹40 lakh for goods or ₹20 lakh for services in a financial year, excluding exempt goods/services, are required to get registered under the GST law.

Based on the data provided by platforms like PhonePe and Paytm, approximately 1,091 cases have been allocated to the Mangalore division. It has been found that the annual turnover conducted digitally by traders and business organizations in these cases exceeds the limit prescribed under the GST Act. The details of digital transactions conducted from the year 2021-22 to 2024-25 are available to the department year-wise.

The issuance of information/instruction letters to a large number of merchants in Bengaluru city has caused concern among small traders. As a result, many merchants have started refusing UPI payments, and it has been observed that there are reports in the media about a return to cash transactions.

Legal action is being taken in a phased manner in relation to the cases allocated to the Mangalore division. The officers of the local/sub-GST offices with jurisdiction are contacting the traders under their jurisdiction by telephone, visiting their business premises and obtaining appropriate information from them and conducting verification. Continuing, they are visiting the premises of the sellers of important goods such as

fish, meat, milk, fruits, vegetables, flowers, etc., which are exempted under the GST Act, checking the documents and creating awareness about the applicability of GST in such cases. Traders who are continuing to carry out taxable transactions are being identified and information and encouragement is being given to them to get newly registered. Similarly, legal action is being taken based on the nature of the transactions they have carried out in previous years and the department is monitoring that traders of exempted goods who want to get registered or who are seeking to do so are not harassed at any stage, informed Shri Kumar V., Joint Commissioner of Commercial Taxes (Administration).

Traders who are carrying out taxable transactions in relation to previous years will be given appropriate time and opportunity for personal hearing as per natural justice while calculating the amount of tax, interest and penalty. Action will be taken only after continuous consultation with the traders and giving them all the opportunities to obtain documents from them and cooperation of traders, tax advisors and KCCI is essential in this regard, he said.

The purpose of this campaign is not to penalize small traders. Instead, our priority is to raise awareness among eligible traders who can be registered to comply with GST requirements. In this regard, our department’s officers and staff are working diligently to provide a trader-friendly service. They also stated that in case of any confusion, traders can directly contact the field-level officers or their office, he said.

The Joint Commissioner of Commercial Taxes (Enforcement), Mr. Lakshapati N. Naik, informed that our department is closely monitoring the nature of goods and services supply and taking legal action under applicable tax rates in cases where tax liability arises. Traders can contact the GST Helpline (1800 425 6300) to report cases of harassment, coercion, or bribery.

A cash-only trend has emerged – Shri Anand G. Pai, President of KCCI, Mangaluru, stated that the fear of the department’s actions has led many small vendors and street stall owners in Mangalore to completely stop digital payments, resulting in a decline in digital transactions and increased concern about the undesirable impact on financial inclusion. He also said that small traders and shop owners should continue their UPI transactions as usual.
Small traders, manufacturers and restaurant operators can opt for the composition scheme with 1% or 5% (restaurant) tax subject to specified turnover limits. This will reduce the compliance burden. The applicability of GST on total business transactions

should be reviewed regularly and GST registration should be obtained immediately if the transaction exceeds ₹20 lakh in case of service providers or ₹40 lakh in case of goods providers, informed CA Keshav N. Ballakuraya, Chairman, Indirect Tax Committee, KCCI.