Karnataka Small Traders to Hold Statewide Bandh on July 25, Protesting GST Notices on UPI Transactions

Small traders and merchants across Karnataka have announced a statewide bandh on July 25 as a mark of protest against what they call “unjust and confusing” GST notices related to their UPI transactions. The traders allege that recent tax notices and scrutiny over payments received via UPI have triggered widespread panic in the business community, threatening to hinder the very digital revolution championed by the government.

Small business owners across Bengaluru, including milk vendors and bakery operators, have planned a three-day demonstration from July 23 in response to receiving GST notices associated with UPI transactions. Many traders have suspended the sale of milk and dairy products, escalating the protest’s visibility on July 23 and 24.

The movement is set to culminate with a major ‘bandh’ - a shutdown rally - at the Freedom Park on July 25, with backing from cab and auto drivers who also fear increased GST scrutiny.

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The campaign, spearheaded by multiple traders' associations including the Federation of Karnataka Traders’ Association, comes after a slew of GST notices were sent to small merchants. These notices, according to the authorities, are based on their digital transaction data-particularly UPI (Unified Payments Interface) payments. Many traders allege these notices do not clearly explain the basis or calculation of tax dues, and in some cases, even wrongly interpret routine bank transfers and peer-to-peer transactions as taxable sales.

“We have always welcomed Digital India and wholeheartedly embraced digital payments, especially during and after COVID-19. Now, the very step we took towards transparency is being used to hound us with unjust tax claims,” said Chandrashekar H, president of a Bengaluru traders' association. “Small traders do not have the resources to hire CAs or lawyers to deal with confusing notices.” On July 25, thousands of shops, markets, and small businesses across Karnataka are expected to remain shut. The traders hope this display of collective shutdown will urge both the state and central governments to address the ambiguities in GST implementation and the use of UPI data in tax assessment.

“This bandh is not just about tax notices; it’s about the survival of small businesses. We urge the government to clarify rules, protect honest traders, and stop penalizing those who adopted digital payments in good faith,” said G. Mohan, another shop owner in Mysuru. The bandh comes at a time when Prime Minister Narendra Modi has lauded the country's advancement in digital transactions, giving global credit to platforms like UPI for transforming India’s payment ecosystem. For many, the current GST scrutiny over UPI dealings seems to contradict government appeals for a cashless economy.

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A spokesperson from the GST department, however, stated that action is being taken strictly as per procedure: “Notices are generated based on discrepancies between reported sales and digital transaction data. Traders can provide clarification if there are mismatches. There is no intention to target those using digital payments per se.” Traders are demanding a clear distinction between personal, non-sales UPI transfers and actual business receipts. They are also urging the government to simplify the GST compliance process for micro and small businesses, and to provide amnesty for procedural errors made during the rapid adoption of digital payments.

Some protesters say that if the government would educate them then they are ready to join the next tax cycle.

The outcome of the upcoming bandh could set the tone for how authorities engage with small traders as India continues its digital transformation. If not handled with sensitivity, experts warn, it could jeopardize hard-won trust in digital payment systems and reverse progress toward a less-cash economy.

As D-day approaches, Karnataka’s small traders are determined to make their voices heard—calling for fairness, clarity, and respect for those who are the backbone of the state’s vibrant economy.

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