Karnataka UPI-GST row: Ruling Congress, BJP play the blame game as small traders protest GST notices

"No UPI, only cash", cry the freshly painted boards outside kirana shops, vegetable marts, milk booths, small tea shops and mutton stalls in Bengaluru. The unregistered small traders in Bengaluru have planned a massive protest on July 25, demanding the withdrawal of the GST notices issued to them by the Commercial Taxes Department.

The traders are upset with the government imposing not only huge amounts as tax that run into crores, but also notices for arrears from the last four years (from 2021).

The GST shocker has led to a political slugfest between the Congress government in the state and the Opposition BJP.

The 2017 GST rules mandate compulsory registration of traders with an annual turnover exceeding ₹40 lakh for goods and ₹20 lakh for services. However, the traders complained that they had received notices claiming huge amounts based on the total UPI (unified payments interface) transactions rather than the actual turnover from their business.

"The bakery, condiments, and small shops have also received GST notices. The government has suddenly woken up and is demanding arrears for the last four years. Many shop owners are exempt from GST but are still issued notices based on UPI transactions, which do not accurately reflect only the income generated through business. We will stop selling essential commodities like milk on July 25," said Ravi Shetty Byndoor, president of the Karnataka Karmika Parishat.

MORE | ‘No escape from GST even if you switch from UPI to cash’: Karnataka tax body warns Bengaluru’s petty street vendors

The Commercial Tax Department issued a statement on July 11 to educate traders after they stopped UPI payments due to tax fears. The department stated that only 98,915 taxpayers had registered themselves and were paying taxes under the composition scheme.

Any person whose annual turnover was less than ₹1.5 crore could opt for the composition tax scheme after obtaining GST registration and pay SGST at 0.5 per cent and CGST at 0.5 per cent. However, the composition tax scheme would not be applicable on the turnover made without obtaining the registration, it added.

The department also cautioned that as per section 22 of the Goods and Services Tax Act, 2017, every person who carried on a business activity and received payment by way of cash, UPI, POS Machine, Bank Payments or by any other means, exceeding the threshold had to register for GST and department would recover the applicable taxes from traders who have received consideration in any form including cash.

Meanwhile, the ruling Congress has blamed the BJP-led government at the Centre for taxing small traders and has started a 'Know GST' campaign to educate small traders in the state.

Chief Minister Siddaramaiah assured the traders that he would raise the issue before the GST council meeting and asked the Commercial Tax department to reach out to the aggrieved traders.

The department officials claimed that they were not tax notices, but a communication to get eligible traders to register for GST. The final notices will be issued after verification, they claimed. The department has also set up a helpline at 1800 425 6300 to assist traders in filing complaints of harassment or bribery demands related to tax notices.

Deputy Chief Minister D.K. Shivakumar said the BJP was only trying to shift the blame on the state government, when the notices are being issued as per the Centre's GST rules.

"The Centre has fixed a turnover limit of ₹40 lakh for GST registrations, and the state government follows the mandate. The GST office has issued notices to about 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 pressure to collect GST is from the Centre. We will write to the Centre. Our state is one of the highest contributors to the GST pool. But we do not want the small and medium businesses to get affected," said Shivakumar.

Former chief minister and Haveri MP Basavaraj Bommai demanded that the CM intervene immediately to provide relief to small traders.

"The State Commercial Tax Department has aggressively targeted small and micro traders, imposing several years of tax dues along with interest and other charges. This has placed a heavy burden on street-side vendors and pushed them to the brink of shutting down their businesses, which is completely unacceptable," said Bommai, adding that the small traders be given concessions on the lines of assistance extended to taxpayers under the 'Karasamadhana' Scheme.

"The state treasury is under pressure due to financial constraints and a shortfall in tax collections during the first quarter of this fiscal year. The Commercial Tax department has taken this harsh step following instructions from the top," mocked Bommai.

BJP state president B.Y. Vijayendra alleged that the Siddaramaiah government was finding it difficult to fund the guarantee schemes, and hence the CM had directed the commercial tax department to enhance GST tax collection.

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