GST Payment Under Scrutiny: Bengaluru Vendors in the Spotlight Over Cash Transactions

In recent days, the Goods and Services Tax (GST) department has raised alarms over a growing trend among vendors, particularly in Bengaluru, where signs such as “No UPI, Only Cash” have become increasingly common. This shift toward cash-based transactions, which effectively bypasses digital traceability, has triggered a new wave of tax surveillance and compliance crackdowns. The move comes as authorities step up efforts to plug revenue leakages in the GST payment system and ensure that all eligible transactions—whether cash or digital—are brought under the tax net.

GST Payment: Why It Matters

The GST framework was introduced in 2017 with the intention of simplifying indirect taxation and improving compliance across the country. One of the critical enablers of GST efficiency has been the integration of digital payment systems like UPI, which automatically leave a record of the transaction, making tax evasion harder.

However, recent observations suggest that some small and medium vendors are deliberately steering customers away from digital payment methods—especially UPI and card transactions—and encouraging cash-only sales. The underlying reason: to avoid registering their business under GST and dodge tax liability.

This development has caught the attention of the tax department, particularly after reports and viral photos emerged showing physical boards in Bengaluru markets with messages stating “Only Cash Accepted.” Authorities now suspect many of these sellers are either not registered under GST or are underreporting their income.

What the Tax Department Says

Responding to the public concern and media reports, the GST department clarified that GST is applicable irrespective of the mode of payment. Whether a transaction is conducted through UPI, card, or cash, if the seller is liable to pay GST, then tax collection and proper invoicing must occur.

The department emphasized that refusing UPI or insisting on cash does not exempt a vendor from GST obligations. In fact, it raises red flags that may lead to audits, investigation, and potential penalties. Officials also indicated that inspections and advisories have already begun in areas where this pattern is being observed.

Legal Framework: Who Must Pay GST?

• Threshold: Businesses with an annual turnover exceeding ₹40 lakh (₹20 lakh for services) are generally required to register for GST.
• Composition Scheme: Small businesses can opt for this simplified GST structure, but they still must file returns and follow prescribed invoicing rules.
• Digital vs. Cash: The law does not distinguish between cash and digital in terms of liability. Avoiding digital payments does not absolve any business from tax duties.

Wider Economic Implications

This crackdown highlights a deeper concern—the persistence of an informal economy that operates largely outside the digital and tax-compliant ecosystem. The government has invested heavily in digital infrastructure (like UPI, GSTN, e-invoicing systems), but this growing resistance from ground-level vendors threatens to undermine these reforms.

When vendors bypass digital payment options, it not only affects tax collection but also creates an uneven playing field where compliant businesses bear the brunt of taxation while others operate freely outside the system.

Moreover, such practices also inconvenience customers who prefer transparent and secure payment options like UPI, which has become the norm in urban India.

Consumer Awareness

Customers also play a role in reinforcing transparency. The government encourages consumers to:

• Request proper GST invoices or bills after purchase
• Insist on digital payment options when available
• Report suspicious activities to local tax offices or consumer forums

A healthy tax system depends on the cooperation of both sellers and buyers in maintaining accurate records and avoiding under-the-table transactions.

Moving Forward: A Message to Vendors

The message from the GST department is clear: Cash-only business models will no longer fly under the radar. With enhanced analytics, GSTN cross-checking, and payment monitoring, the authorities are better equipped than ever to detect anomalies in sales patterns and compliance records.

Vendors who are eligible for GST registration must come forward and regularize their tax position. Encouraging digital payments is not only good business practice—it’s a legal and ethical requirement in today’s economy.

Conclusion

As India pushes for greater tax transparency and a more formalized economy, GST compliance remains a critical pillar. The recent actions by the tax department in Bengaluru serve as a timely reminder that compliance is mandatory, regardless of payment mode.

The shift toward cash-only transactions, while seemingly minor, can have serious consequences for vendors and buyers alike. Embracing GST norms and digital payments not only ensures legal safety but also strengthens the foundation of India’s evolving digital economy.