A Comprehensive Report On GS Row In Karnataka

Owing to lack of understanding on part of small/micro traders in particular unregistered under GST, stopped accepting payments through digital payments gateways creating fears that digital transactions weakening.

Many small traders including fruit/flower/vegetables/milk and its products vendors among others were among these received notices from the Commercial Tax Department in July and some notices to small traders asked to clear tax amount to a tune of Rs 29 lakh and others the tax arrears were about Rs 1 crore. A trader engaged in selling condiments at Kengeri in Bengaluru, Rajendra Shetty said he received a notice from Commercial Tax asking to pay RS 67 lakh.

While traders on notices stated, “Paying up huge taxes will eventually lead them to dire straits” but sources in Commercial Tax Department clarified ‘The notices/intimation to traders was aimed seeking clarifications on the business carried out by them.”

Among many small traders served notices include-Raghavendra, a trader dealing in condiments, has been asked to clear tax of Rs 29 lakh in the notice served on him from the officials of Commercial Tax. Such hundreds of aggrieved traders feel aggrieved by the Commercial Tax notices across the State will be going on strike.

Vendors dealing in milk and its products/fruits and vegetables/bread among others are exempted under GST but their transactions crossed Rs 40 lakh a year thus drawing the attention of the Commercial Tax Department.

As many as 9,000 vendors in Bengaluru and other parts received notices/intimations out of identified 18,000 faulty vendors. The officials of the Commercial Tax Department calculated transactions of traders and started to serve notices/intimations to those whose bank accounts showed transactions above Rs 40 lakh a year.

Sources said there are some persons conducting business under the guise as small/micro traders and their transaction exceed Rs 40 lakh and even touch crores transactions a year while small traders having done their business have not kept their records and many have paid Income Taxes but not GST owing to lack of proper understanding leading to confusion as well as fear to paying huge tax amount at once.

Soon, various trade associations joined together and one protest was led by Ravi Shetty, president of Karmika Parishat, to register their protests against the notices served on small traders and decided to protest by wearing black stripes around their arms on July 23 and 24 before going for an indefinite strike from July 25 onwards to mount pressure on the State Government from going ahead with initiating action against traders who have failed to pay GST.

Meanwhile, confusion prevailed among the small traders that transactions done through digital payment gateways created problems for them and soon traders started to discontinue accepting digital payments and sticking only to cash payments from customers.

However, taking note of the digital payments taking a beating, officials of Commercial Tax Department “Every person who carries on a business activity and receives payment by way of cash, UPI, POS Machine, bank payments or by any other means exceeding Rs 40 lakh annually in case of person dealing only in goods and exceeding Rs 20 lakh annually in case of persons dealing in services have to obtain GST registration mandatorily.”

Further, the Commercial Tax Department officials clarified at present 98, 915 tax payers have registered themselves and are paying taxes under the composition scheme and stated the number of persons to whom notices or intimations were issued are less than 10 percent of the already paying taxes as per law.

The department made it clear “The GST is applicable on the consideration received for the supplies in any form and UPI is only a method of receiving such consideration.”

Over the notices served on small traders was opposed by Bharatiya Janata Party Lok Sabha (BJP) member representing Mysuru-Kodagu seat Yaduveer Krishnadatta Chamaraja Wadiyar and he termed “This sudden enforcement is a veiled attempt to gradually push small traders into GST ambit.”

He stated ‘Without any prior guidance for awareness, backdated tax notices for four to five years have been served. This is unacceptable” and accused the ruling Congress State Government “An attempt to recover revenue lost due to unscientific financial guarantees by burdening the common trader.”

Yaduveer was referring to the State Government spends about Rs 55,000 crore annually for its 5-guarantees such as free for women in State owned buses across the State, upto 200 units of free power for a household, Rs 2,000 cash benefit scheme for a female head of a family and two others, accusing the scheme lead to burden on the State exchequer.

Expressing support for small/micro traders, former chief minister and Member of Parliament Basavaraj Bommai expressed similar views to that of Yaduveer Wadiyar and stated “Due to financial constraints and shortfall in tax collections, during the first quarter of this fiscal year, the State treasury is under pressure.”

Bommai said “The Commercial Tax Department has taken harsh step of serving notices in haste, following instructions from the top (Chief Minister)” and he wanted Chief Minister Siddaramaiah to intervene and provide relief to small and micro traders over GST notices served on them.

After the matter escalated and threat of shutting down sale of milk and its products among others, Chief Minister Siddaramaiah chaired a meeting with representatives of various trade unions and assured small/micro traders “no taxes will be collected from traders dealing in exempted goods such as milk/vegetable, meat and fruits.”

CM said old tax arrears would not be pursued, provided all small/micro traders register under GST and start paying applicable GST in future.

Welcoming the Chief Minister’s statement, president of M.G. Balakrishna stated “We wholeheartedly welcome the Chief Minister’s decisive and transparent stand. The government’s assurance that exempts goods traders will not be taxed and that arrears will be waived upon registration has restored trader confidence.”

Assuring FKCCI to work in close association with the State Government, Balakrishna stated “FKCCI will now intensify its support by organising handholding programmes and digital literacy workshops to facilitate GST registration and compliance.”

General Secretary of Karnataka Bakery and Sweets Association Dr B.R. Madhu stated “We have told members to comply with GST rules for ease of doing business.”

Over traders' aversion to digital payments, Madhu said dealing only in cash transactions will hit business and stated “There is nothing mandatory on the use of digital payments/UPI among others. Traders are free.”

Chief Minister Siddaramaiah assured not to pursue with old tax arrears, said Madhu and stated “We have asked officials of Commercial Tax to give in writing.”