'Centre Imposed 1% Tax': Karnataka CM On GST Notices Worth Lakhs, Promises Waiver On 3-Year Arrears

Amid growing discontent among Karnataka’s small trading community over tax notices linked to Unified Payments Interface (UPI) transactions, Chief Minister Siddaramaiah has announced a series of relief measures, ensuring that arrears related to exempted goods and services over the past three years will not be pursued.

Speaking to reporters after a meeting with representatives from trade bodies, the Chief Minister said, “I called a meeting with small traders and others to discuss the issue of notices being issued to small traders, as notices were being issued to those with a turnover of more than Rs 40 lakh. Around 9,000 notices were issued”, news agency PTI reported.

The central government has decided to impose a one per cent tax on these individuals, he mentioned.

This intervention comes in the wake of widespread protests planned for July 25, including calls from trader associations across Karnataka to boycott UPI payments.

#WATCH | Bengaluru | Karnataka CM Siddaramaiah says, "I called a meeting with small traders and others to discuss the issue of notices being issued to small traders, as notices were being issued to those with a turnover of more than Rs 40 lakh. Around 9000 notices were issued.… pic.twitter.com/2m8idTXzkV

— ANI (@ANI) July 23, 2025

He assured that taxes will not be collected from those dealing in items such as bread, milk, essential food products, fruits, vegetables, flowers, and tender coconut. “We will not pursue notices pertaining to goods and services that are exempted,” he said.

The protest was triggered by thousands of tax notices sent by the state’s Commercial Taxes Department, citing data from UPI transactions. According to PTI, approximately 6,000 such notices had been issued. However, the CM clarified that only traders with digital transactions exceeding Rs 40 lakh were targeted, primarily to encourage them to register for the Goods and Services Tax (GST).

Mandatory GST Registration Moving Forward

While the government has decided not to enforce old arrears, Siddaramaiah emphasised the importance of bringing all eligible traders under the GST framework. “Traders must register. Registration is mandatory because everyone needs to be brought within the tax net,” he said.

However, he made it clear that those exclusively dealing in exempted goods do not need to register. “There is no need to register with the Commercial Taxes Department for exempted goods. We will not take any action regarding such notices,” the CM reiterated.

Following the meeting, trade bodies, including the Federation of Karnataka Chambers of Commerce and Industry (FKCCI), agreed to call off the planned agitation.

To address concerns and confusion among traders, Siddaramaiah announced that the government will strengthen the existing helpline system to improve accessibility and support timely tax compliance.

A statement from the Chief Minister’s Office (CMO) noted that Karnataka ranks second in GST collections in the country and shares 50 per cent of its GST revenue with the Centre, as per the guidelines of the GST Council chaired by Union Finance Minister Nirmala Sitharaman.

Reaffirming the government’s commitment, Siddaramaiah said, “The government will assist in timely tax payments and strengthen the existing helpline for better accessibility.”

The move is seen as part of the state’s ongoing efforts to support small traders and ensure clarity in tax compliance mechanisms.

india