UPI Tax Shock: These States Are Also Sending ₹40 Lakh Tax Notices to Local Traders

After Karnataka, four more states—Andhra Pradesh, Uttar Pradesh, Tamil Nadu, and Gujarat—have started asking for turnover data of merchants from UPI apps and payment aggregators, according to news reports. These departments are identifying traders who may have crossed the ₹40 lakh annual turnover threshold, which requires GST registration under law.

Traders Fear Confusion and Harassment Over UPI Tax Notice

The issue began in Karnataka, where 14,000 traders have received notices based on their UPI receipts between FY 2021–22 and FY 2024–25. The problem? UPI data only shows total money received, not whether the items sold attract GST.

Many small vendors, like tea stalls and bakeries, sell goods that are GST-exempt. Still, they are receiving notices simply because their UPI receipts crossed ₹40 lakh, leading to fear and confusion.

Traders Plan Bandh, Seek Clarity

Traders in Karnataka have threatened a statewide shutdown on July 25. As a warning, they plan to stop the sale of milk-based products on July 23–24. Groups have asked the state to withdraw notices or face protests.

Shift Back to Cash Hurts Digital Payments

UPI apps like Paytm, PhonePe, and Google Pay are seeing cancellations from merchants. Traders are also switching to personal accounts or relatives’ UPI IDs to avoid notices. This makes tracking harder for authorities and could set back India’s digital payment growth.

Read more: ITR Filing 2025: AI is Tracking Suspicious Tax Claims Made by Salaried Taxpayers!

Conclusion

Small traders say they need guidance, not pressure. Many don’t understand GST rules or how turnover differs from profit. While action against fraud is valid, experts urge tax officers to educate, not intimidate. If not handled properly, this issue may lead to a major setback for India’s digital economy.

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