Cash Is King? Small Vendors Now Prefer Cash Over UPI

As per news reports amid growing fears of tax liability, many small traders across Bengaluru are phasing out UPI payments and shifting back to cash. The trend, driven by GST notices issued against UPI transactions, signals a reversal in India’s digital payment push, particularly among unregistered vendors and microbusinesses.

Vendors Turn Cautious Amid Tax Notices Over UPI

Several Bengaluru-based small business owners have begun rejecting digital transactions following notices from GST authorities. According to multiple vendors, the total UPI inflows have been interpreted as annual income, attracting tax notices even when real incomes do not breach GST thresholds of ₹40 lakh for goods or ₹20 lakh for services. 

Many allege that GST officials are assuming turnover based solely on transactions recorded through payment apps. Fearing forced GST registration, fines and even eviction threats, traders now insist on cash-only payments to avoid surveillance on earnings.

Ground-Level Impact on Daily Operations

Business owners running pushcarts, tea stalls and condiments kiosks say daily revenues ranging between ₹2,000 and ₹5,000 are being misclassified as taxable income when received digitally. They argue that some UPI inflows include loans or family transfers, unrelated to actual business. As a result, many have taken down QR codes and displayed “No UPI, only cash” signs. This shift undercuts the digital convenience India has promoted strongly post-2016.

Read More: PMO Clears Proposal for GST Framework Revamp; All Eyes on Upcoming Council Meet!

Karnataka’s GST Revenue Goals Trigger Enforcement

The Karnataka government has intensified tax scrutiny to meet its ambitious ₹1.20 lakh crore revenue goal for FY 2025-26. City-specific drives target unregistered traders following UPI payment histories dating back to the Financial Year 2021–22. The objective is to tap into overlooked tax segments as Bengaluru becomes a trial ground. If proven successful, similar methods may be adopted across other state departments facing fiscal pressures.

Broader Implications on the Digital India Mission

This pushback from the street economy could pause the rapid UPI adoption seen nationwide. As small-scale entrepreneurs revert to cash to sidestep legal and financial ambiguity, digital payment systems might see reduced traction in informal markets. The development signals a need for clearer regulatory interpretation and more tailored GST compliance frameworks for microbusinesses.

Conclusion

The return to cash among Bengaluru’s vendors highlights the tensions between tax enforcement and digital inclusion. Faced with mounting GST scrutiny, these businesses are choosing legal security over cashless convenience. The unfolding scenario reveals significant implications for both tax collection strategies and India’s commitment to a digital economy.

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