The state government said GST notices have been issued to vendors who exceeded the stipulated limit. However, traders maintain they have no means to pay the hefty tax demands imposed on them.
Published Jul 22, 2025 | 11:47 AM ⚊ Updated Jul 22, 2025 | 6:31 PM
A shopkeeper with UPI QR codes beside him. (iStock)
Synopsis: The Commercial Tax Department sent GST notices to thousands of small businesses in Karnataka. Traders maintain they have no means to pay the hefty tax demands imposed on them and demand the withdrawal of the notices.
The Commercial Tax Department has been sending Goods and Services Tax (GST) notices to thousands of small businesses in Karnataka, including bakeries, flower shops, and grocery stores, leaving many of them shocked as tax demands for some even ran into lakhs or crores.
A GST registration is applicable if a business crosses an annual turnover of ₹40 lakh in case of goods and ₹20 lakh in case of services.
The state government said GST notices have been issued to vendors who exceeded the stipulated limit. However, traders maintain they have no means to pay the hefty tax demands imposed on them.
Meanwhile, the department, in a press note, advised traders not to get confused and to submit an explanation with relevant documents after visiting the office from which they have received notice. It said the officers would verify the documents and suitably inform them of the relevant provisions of the GST and also their remedies and would levy tax at the applicable rates only on the taxable turnovers after excluding the tax-exempted goods and services.
“All the officers have been instructed to provide suitable guidance and co-operation and create awareness amongst the traders in this regard. Further, it has also been instructed to provide new registrations smoothly without causing any kind of inconvenience to the taxpayers,” the department said.
Harish Shetty, who runs a small condiments shop named Ganesh Condiments in Bengaluru, told South First that he received a notice to pay around ₹40 lakh in tax at a time when he is making just enough to survive.
Harish Shetty. (Pavan Kumar SR/South First)
“We came to Bengaluru from our native place to build a better life. We run a small shop, selling milk, bananas, buns, biscuits, and cool drinks. Our entire stock is worth only ₹10,000. However, we are now being asked to pay between ₹30 lakh and ₹40 lakh as tax. How is that even possible for people like us?” Harish asked.
“We are not against paying tax. We want to do things the right way. But we can’t afford to pay tax for previous years — when we were just trying to survive. If we sell a packet of milk for ₹30, our profit is only ₹1. But the tax officials count the entire ₹30 as income,” he said.
Shetty said that vendors like him start their day at 4 am and work till 11 at night. “Our bodies are giving up. Many of us have developed varicose veins from standing for so long. Still, we work hard and honestly. But who do we share our pain with? Officers sit in AC rooms and send us notices — without seeing our reality,” he said.
“One month ago, we got a warning notice from the Commercial Tax Office. Then a week ago, we received a shocker — a ₹40 lakh tax demand. How can a small vendor pay that? Even sustaining our family is a struggle,” he added.
Harish further questioned the authorities: Why were they indulging in double taxation by demanding tax on goods that had already been taxed?
“Cool drinks come to us after tax has already been paid. Why should we pay tax again on them? We earn in paisa and rupees, not in lakhs. We already have BBMP issues, and now this GST burden on top of that. We have received one more bagya from the state government, GST bagya. We promise to register under GST and get a current account in the future; once we are stable. However, please withdraw this substantial tax demand. If not, we have no choice — we’ll have to shut shop and go back to our villages. We simply can’t survive like this,” Harish said.
The Commercial Tax Department has issued GST notices from 2021 to 2025 on the basis of UPI transactions. Other traders also echoed the views of Harish.
“I run a small bakery. On most days, our sales are just ₹3,000 to ₹4,000. From that, we have to pay the shop rent, electricity bill, water bill, and also manage our family’s daily needs. We’re barely managing to survive. In this situation, if the government suddenly sends us a tax notice of ₹50 to ₹60 lakh, how are we supposed to pay it? It’s completely beyond our means,” Chandra Shekar Shetty, a bakery owner, told South First.
“If we are forced to pay such a huge amount, we have no option left — we may as well die. What else can a poor person do?” he asked.
“We have come to this city along with our family with dreams of building a better life. We are not running away from responsibility. However, we cannot afford to pay such a huge tax. With the small income we make, paying such a large amount is not possible — unless it’s at the cost of our own lives,” he added.
“We humbly request the government to understand the reality of small businesses like ours. Please withdraw these unrealistic tax demands. Give us time. We’re willing to follow the rules, register properly, and pay taxes in the future. But right now, we want to live with dignity,” said Chandra Shekar.
A GST notice issued by the Commercial Taxes Department.
The Union government introduced UPI in 2016 to minimise cash transactions and curb the accumulation of black money. Since then, most small traders have been using the facility for ease of business.
Ravi Shetty, President, Karnataka Karmikara Parishath, told South First that traders in the state will stop selling all dairy products on 24 July and observe a complete bandh on 25 July if the government does not withdraw these notices.
“Since 2020, the government has taken harsh steps without even informing us. It feels like a surgical strike on poor and small-scale traders. While big commercial complex owners went to court and avoided tax, the government turned its focus on small businesses instead. This action by the Chief Minister and the Commercial Tax Department is not fair,” he said.
“Without any prior notice, they’ve slapped GST demands of lakhs of rupees based only on PhonePe and Paytm transactions. This has created fear and tension among shopkeepers. We support the Digital India programme. We’re not asking anyone to remove QR codes — but if shopkeepers do remove them, we won’t stop them either. It feels like the state government is trying to kill a Union government initiative by forcing people to go offline,” he added.
“We are ready to pay taxes from the 2025–2026 financial year. But the current demands must be withdrawn. On the day of the bandh, every small shop will shut down in protest,” Ravi added.
Meanwhile, Chartered Accountant (CA) Adith Kumar Gowda, who runs Adith and Associates in Bengaluru, told South First that since most small vendors use their savings account for their businesses, their transactions include not just business transactions but also personal and loan-related ones.
“After excluding personal and loan transactions, if the remaining business turnover is below ₹40 lakh, no tax will be applicable. To claim this, traders must meet tax officials and provide necessary documents to explain their transactions,” he said.
After facing the “horror” of GST notices, several shops have switched to accepting only cash payments. In the basement parking area of KR Market, a board reads, “No online payments”. When asked about it, the person in charge told South First, ‘The owner has instructed us not to accept online payments due to some GST-related issues.”
The Additional Commissioner of the Commercial Tax Department recently issued a press release clarifying the provisions for tax assessment under the Goods and Services Tax (GST) Act, 2017. The official urged traders to submit proper documentation and justifications for their transactions to claim applicable exemptions.
Meanwhile, Deputy Chief Minister DK Shivakumar said that the Opposition BJP in the state was attempting to shift the blame for the GST notices issued to small traders onto the state government.
Speaking to reporters at his Sadashivanagar residence, he said, “The BJP government at the Centre had fixed a turnover limit of ₹40 lakh for GST registration and had also intimated the state governments to follow it. The GST office has issued notices to around 14,000 traders, including tender coconut, flower, and vegetable vendors.”
“Our leader Rahul Gandhi had opposed the GST in the past. The BJP must withdraw the GST notices issued to small traders. The CM will discuss with the officials and take necessary steps regarding the GST notices issued,” he said.
When reporters asked if the state government would write to the Union government about the GST notices, he said, “We will certainly write to them. We need to get justice for our people. It is affecting small and medium traders. Our state contributes the highest for GST pool.”
Replying to a question whether the notices have been issued because of the tax collection targets given by Chief Minister Siddaramaiah, he said, “The officials are following the rules set by the Centre’s GST Council. These notices have been issued due to the pressure from the Central GST Council.”
(Edited by Muhammed Fazil.)
