Bengaluru: Small businesses across Karnataka — including tea stalls, bakeries, salons, and local eateries — have raised concerns after receiving GST notices based on their UPI transaction volumes. The Commercial Tax Department has issued these notices to entities whose annual digital receipts exceeded ₹40 lakh for goods or ₹20 lakh for services, even if they are not GST-registered.

Tax consultants are urging affected traders to respond to the notices within the stipulated deadline to avoid penalties and interest. “Traders need not panic or pay tax immediately. But they must respond with proper transaction details to the department, either online or in person,” said M Chandrashekhar of Regina GST Consultants.

He added that not all UPI-based business receipts were taxable under GST, and correct classification of goods and services could significantly reduce liability. For instance, bread is tax-exempt while packaged snacks attract 5% GST.

Experts also recommended eligible traders to register under the GST Composition Scheme. “Those with turnover below Rs1.5 crore can opt for the scheme and pay only 1% tax, though they cannot claim input tax credit,” explained Madhukumar D of U Rao & Associates.

To address confusion, the Commercial Tax Department clarified that the notices are based on verified UPI data from 2021–22 to 2024–25 and are intended only for those exceeding the turnover threshold. “We’re not targeting small traders arbitrarily,” said a senior official. “If eligible, they can regularise their status under the Composition Scheme.”

Traders can visit gst.kar.nic.in for registration and guidance. Experts and officials have jointly urged timely compliance to avoid legal complications and ensure continued business operations.