After Karnataka, more states seek merchant data from UPI apps
What's the story
Following Karnataka, four other Indian states, Andhra Pradesh, Uttar Pradesh, Tamil Nadu, and Gujarat, have sought annual turnover data from Unified Payments Interface (UPI) apps and payment aggregators. The move is part of a broader effort to ensure compliance with Goods and Services Tax (GST) regulations. Under government rules, all merchants with an annual turnover exceeding ₹40 lakh must register for GST.
Merchant resistance
Merchants threaten statewide shutdown in Karnataka
The demand for UPI transaction data has sparked a backlash from merchants, especially in Karnataka. Small traders across the state have threatened a statewide shutdown on July 25 if the GST demand notices are not withdrawn by the government by July 24. The protest is being led by various trade bodies that have approached both the tax departments and UPI apps for discussions.
Payment shift
Concerns over impact on digital payments in India
The demand for UPI transaction data has raised concerns over its impact on digital payments in India. A senior banker working with UPI apps said this is a tax matter that only the government can solve. Despite the unrest, customer preference for UPI remains strong in Bengaluru and other big cities. However, if more states follow Karnataka's lead in sending notices, it could have a major impact on merchant behavior across the country.
Data collection
Approach questioned by industry experts
The Karnataka Commercial Tax Department has collected data from UPI apps and other service providers on payments received by traders up to the current fiscal year. The department has identified 14,000 cases and is issuing notices to those with UPI receipts exceeding ₹40 lakh in a financial year.However, some industry experts have questioned this approach, arguing that it doesn't accurately reflect GST applicability for all goods/services.
App impact
Merchant pushback against UPI apps
The GST notice has also led to a merchant pushback against UPI apps. Many shopkeepers have started calling up merchant acquirers, asking them to stop subscriptions for their services. This could lead to a rise in cancellations over the coming months if the situation doesn't improve. Major UPI merchant acquirers include Paytm, Google Pay, PhonePe, and BharatPe, among others.