KARNATAKA – Small-time vegetable seller Shankargouda Hadimani, operating near a municipal high school in Haveri, Karnataka, has been served a ₹29 lakh GST notice after authorities flagged ₹1.63 crore in UPI transactions over four years, citing alleged tax dues . Though fresh vegetables are GST-exempt, his acceptance of digital payments triggered a compliance drive that caught many unregistered small traders in its wake.
Digital Trail Spurs Compliance Crackdown
Karnataka’s Commercial Taxes Department launched a campaign, spurred by UPI transaction data, to detect unregistered traders exceeding the turnover threshold—₹40 lakh for goods and ₹20 lakh for services. Officials have since issued notices to about 14,000 vendors, including Shankargouda . Haveri’s notice asserts that his total UPI inflows equate to a taxable business turnover, making him liable for ₹29 lakh in tax arrears.
However, experts note that fresh, unprocessed vegetables are zero-rated under GST, and Shankargouda insists he maintained income tax filings and modest profits, despite handling digital payments . Many such vendors now fear that UPI transparency has become a compliance trap rather than a convenience.
Small-Time Sellers Shift Away from Digital
Widespread fear among traders has emerged, with many removing QR codes to avoid data tracing. Bengaluru’s vendors are increasingly reverting to cash, citing panic over tax liabilities and inadequate guidance . Responding to the backlash, Karnataka launched a “Know GST” campaign, offering helplines, workshops, and raising awareness that notices are data requests—not immediate demands—and allow instalment repayment.
While UPI inclusion has been key to financial inclusion, its integration into compliance systems has burdened unregistered micro‑traders. Experts argue that these vendors often lack formal bookkeeping, operate on slim margins, and are unaware of tax structures. Transparent thresholds, simplified schemes, and better outreach could preserve digital adoption while ensuring equitable enforcement.