‘No UPI, Only Cash’: Why Bengaluru Vendors Are Turning Away From Digital Payments
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India’s digital payment revolution has been celebrated worldwide, with the Unified Payments Interface (UPI) turning millions of everyday transactions cashless. But on the busy streets of Bengaluru, the trend seems to be reversing. Increasingly, small shopkeepers and street vendors are taking down QR codes and putting up handwritten signs that read: “No UPI, only cash.”
According to a report by the Economic Times, this return to cash isn’t just about habit—it’s about risk. Several small vendors in Bengaluru have recently received unexpected Goods and Services Tax (GST) notices amounting to lakhs of rupees. Some of these notices have even reached vendors who aren’t formally registered under GST.
The tax worry behind the shift
As per GST rules, any shop or business must register under GST if annual sales exceed ₹40 lakh, and for service businesses, the limit is ₹20 lakh. The Karnataka commercial taxes department, cited in the report, noted that GST notices were sent to vendors whose UPI transaction records from 2021–22 suggested higher sales than these limits. With digital payments leaving a transparent trail, these vendors are now expected to register for GST and pay taxes accordingly.
For many small vendors, the sudden arrival of these notices has created uncertainty and fear. As a result, cash—which leaves fewer digital traces—feels like a safer option.
A contrast to India’s UPI boom
This trend in Bengaluru contrasts sharply with India’s larger digital success story. An IMF note recently highlighted that India now offers the world’s fastest payments system, powered largely by UPI. Launched in 2016 on the IMPS infrastructure, UPI has seen explosive growth and now handles over 18 billion transactions per month, eclipsing all other forms of electronic retail payments in the country.
In June alone, UPI volumes grew by 32% compared to the same month last year, while transaction value rose by 20%. Daily UPI transactions increased to 613 million in June, up from 602 million in May—an indicator of the platform’s continuing popularity.
A tale of two realities
While UPI continues to break records nationwide, the situation in Bengaluru highlights an important challenge: for very small businesses, the transparency of digital payments can bring tax complications they feel ill-prepared to manage. As tax compliance costs and fears rise, many are stepping back to what feels safer: cash-only transactions.
The government’s push for a digital-first economy remains strong, but the story from Bengaluru is a reminder that policy, regulation and small-business realities must evolve hand in hand to sustain truly inclusive digital growth.
According to a report by the Economic Times, this return to cash isn’t just about habit—it’s about risk. Several small vendors in Bengaluru have recently received unexpected Goods and Services Tax (GST) notices amounting to lakhs of rupees. Some of these notices have even reached vendors who aren’t formally registered under GST.
The tax worry behind the shift
As per GST rules, any shop or business must register under GST if annual sales exceed ₹40 lakh, and for service businesses, the limit is ₹20 lakh. The Karnataka commercial taxes department, cited in the report, noted that GST notices were sent to vendors whose UPI transaction records from 2021–22 suggested higher sales than these limits. With digital payments leaving a transparent trail, these vendors are now expected to register for GST and pay taxes accordingly.
For many small vendors, the sudden arrival of these notices has created uncertainty and fear. As a result, cash—which leaves fewer digital traces—feels like a safer option.
A contrast to India’s UPI boom
This trend in Bengaluru contrasts sharply with India’s larger digital success story. An IMF note recently highlighted that India now offers the world’s fastest payments system, powered largely by UPI. Launched in 2016 on the IMPS infrastructure, UPI has seen explosive growth and now handles over 18 billion transactions per month, eclipsing all other forms of electronic retail payments in the country.
In June alone, UPI volumes grew by 32% compared to the same month last year, while transaction value rose by 20%. Daily UPI transactions increased to 613 million in June, up from 602 million in May—an indicator of the platform’s continuing popularity.
A tale of two realities
While UPI continues to break records nationwide, the situation in Bengaluru highlights an important challenge: for very small businesses, the transparency of digital payments can bring tax complications they feel ill-prepared to manage. As tax compliance costs and fears rise, many are stepping back to what feels safer: cash-only transactions.
The government’s push for a digital-first economy remains strong, but the story from Bengaluru is a reminder that policy, regulation and small-business realities must evolve hand in hand to sustain truly inclusive digital growth.
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