Karnataka commercial taxes department on Thursday clarified that small vendors in Bengaluru must continue paying Goods and Services Tax (GST) at applicable rates, whether payments are made through digital methods or in cash.It said that irrespective of whether payments are received through Unified Payments Interface (UPI), cash, Point-of-Sale (PoS) machines, or bank transfers, GST would still be collected at applicable rates.The department issued a detailed statement in response to media reports suggesting that some traders had stopped accepting UPI payments after unregistered businesses reportedly received GST notices.These notices were reportedly issued to those whose annual UPI transactions crossed Rs 20 lakh for services or Rs 40 lakh for goods, the threshold requiring mandatory GST registration. Some vendors facing demands running into lakhs of rupees.Officials have urged traders who received these notices to submit supporting documents to the respective authorities. These documents will be verified, and GST will be levied only on taxable turnover, after excluding exempt goods and services.Commissioner Vipul Bansal and additional commissioner Chandrashekhar Nayak told ET that officers have been directed to assist and educate traders about compliance requirements. They also assured that the department is committed to facilitating smooth registration for those currently outside the GST net.As of now, 98,915 traders have registered under the composition scheme and are paying taxes accordingly. The department highlighted that the number of traders who received notices is less than 10% of the total registered taxpayers under this scheme.According to the statement, dealers can continue to pay 1% of their taxable turnover under the composition scheme. Under GST law, any person whose annual turnover exceeds Rs 20 lakh for services or Rs 40 lakh for goods must register, irrespective of the mode of payment.Traders with annual turnover below Rs 1.5 crore are eligible to opt for the composition tax scheme after registering under GST, as per an ET report. They can pay State GST (SGST) at 0.5% and Central GST (CGST) at 0.5%. However, this benefit is not available to businesses that operate without proper GST registration.The department had earlier clarified that these notices were issued only to businesses whose UPI transaction data since 2021–22 showed turnover exceeding the threshold for mandatory registration. It stated that such businesses are required to register under GST, declare their taxable turnover, and pay tax at the applicable rates.Karnataka’s tax officials are facing mounting pressure to achieve a revenue collection target of Rs 1.20 lakh crore for the 2025–26 financial year. Chief minister Siddaramaiah is caught between the challenge of financing welfare guarantees worth Rs 52,000 crore and growing demands from Congress MLAs for increased funding towards infrastructure projects.
