Bengaluru: Many street vendors and small businesses in Bengaluru are dropping digital payments and reverting to cash transactions following a recent Goods and Services Tax (GST) compliance crackdown by the Commercial Taxes Department.
The shift comes after authorities began sending notices to businesses suspected of exceeding the GST registration threshold without registering. As per current rules, GST registration is mandatory for businesses with annual turnovers above Rs 40 lakh for goods and Rs 20 lakh for services.
Tax officials have gathered UPI transaction data from 2021 to 2025 to identify unregistered businesses. Nearly 65,000 merchants across Karnataka were reportedly found to have received significant UPI payments without GST registration.
In response, vendors have started hiding or removing their UPI QR codes to avoid scrutiny. Some were found using multiple UPI IDs registered under the names of family members to split transactions and stay under the radar.
Fearing that GST compliance could eat into their slim profit margins, many vendors are turning to cash-only transactions despite government assurances that eligible businesses can claim tax credits with proper documentation.
The crackdown has triggered confusion and anxiety among Bengaluru’s informal traders. While officials maintain that the move is aimed at bringing more transparency into the system, vendors worry about rising costs and compliance burdens.
As GST enforcement tightens, the city's informal economy faces growing uncertainty, with a noticeable shift away from digital payments back to cash.