Bengaluru, Jul 23 (PTI) With small traders in Karnataka going on the warpath over the government issuing GST notices based on UPI transactions and the opposition backing them, the state government on Wednesday announced that cases ranging between 2-3 years won't be pursued, prompting the trade bodies to call of their proposed agitation on July 25.

Although, the government asserted that the action of issuing notices was within the framework of law.

On Wednesday, Chief Minister Siddaramaiah held discussions with traders' associations, which raised concerns about confusion over the GST notices, many of which include loan amounts and personal transactions.

State BJP President B Y Vijayendra accused the CM of setting targets for the Commercial Taxes Department, which had issued the notices to small and micro traders. While urging the government to withdraw the notices, the main opposition party also extended its support to the traders' earlier call to strike work on July 25.

The CM said that old tax arrears will not be pursued, provided all such traders register under the GST Act and begin paying Goods and Services Tax moving forward.

"I told the traders not to go on strike or stage a demonstration at Freedom Park. They have agreed to withdraw their agitation," the CM told reporters after meeting with the trader community.

He added that "we will not collect taxes from traders dealing in exempted goods, even if notices have been issued. I have also instructed officials not to pursue cases related to notices for clearing arrears from the past two to three years." The chief minister said the government will not pursue these arrears and will ensure traders do not face problems—provided they register with the Commercial Taxes Department.

"Traders must register. Registration is mandatory because everyone needs to be brought within the tax net," he said.

He clarified that businesses dealing exclusively in exempted goods will not be required to register.

The chief minister, in a statement, said that notices were issued only to traders with UPI transactions exceeding Rs 40 lakh, primarily to prompt GST registration.

Siddaramaiah reaffirmed his commitment to supporting small traders and ensuring lawful business practices.

He said the government will assist in timely tax payments and strengthen the existing helpline for better accessibility.

Several traders' associations had earlier called on these businesses to boycott UPI transactions and announced a statewide strike on Friday.

Lashing out at the ruling Congress over the matter, Vijayendra accused Siddaramaiah of setting targets for the Commercial Tax Department "The Commercial Tax Department issuing GST notices to small and micro traders has sparked widespread concern. These traders are deeply worried, while the chief minister and his ministers are attempting to shift the blame on the Centre," Vijayendra told reporters here.

Pointing to Siddaramaiah’s earlier public statement that "Karnataka must surpass Maharashtra to become number one in GST collection", Vijayendra said the CM has even fixed revenue targets for officials.

"At a time when the state coffers are empty, the CM is pressuring tax officials to issue recovery notices," he alleged.

"I urge the chief minister to immediately halt the issuance of these notices to small and micro traders and to withdraw those already served," he added.

Reiterating BJP's support for the traders' protest, the state party chief said even small vendors selling milk and curd have been served GST notices.

Meanwhile, Meera Suresh Pandit, Joint Commissioner of Commercial Taxes, clarified that notices are not final tax demands and the recipients have the right to respond with supporting documentation. If the reply is convincing or the goods and services are exempted under the GST Act, notices will be dropped.

The top tax official termed the issuing of notices as within the framework of law.

"When a person reaches the threshold limit of Rs 20 lakh for services or Rs 40 lakh for goods, it is mandatory for the person to get registered under the GST Act to take registration and declare his turnover," the officer told PTI.

"The registration empowers the trader to collect taxes from the consumers and pay it to the government. These taxes are meant for the government, but when the dealers collect them and fail to remit them, they are treated as unregistered persons, and we issue notices accordingly," she added.

The department, she said, cannot individually identify every trader evading registration. Instead, the Services Analysis Wing at the department's head office used reliable sources such as UPI transaction data to flag potential defaulters.

"If a person has transacted over Rs 20 lakh for services or Rs 40 lakh for goods in a year through UPI, it indicates that they may be liable to register under GST," Pandit said, adding that notices were based only on preliminary data, not final determinations.

Trade activist Sajjanraj Mehta raised concerns over the fairness of the recent GST notices.

He stated that while the Commercial Taxes Department is legally within its powers to use such data, the lack of prior warning, context, and education has created confusion.

"Many small traders were unaware that their UPI inflows, often a mix of business and personal transactions, would be treated as undeclared turnover," Mehta said. PTI GMS KSU SSK ADB SA

GST registration enforcement: government will not pursue older tax arrears if traders register and remit taxes moving forward. The government announced that preliminary GST notices based on UPI transaction data were issued to prompt registration, that recipients retain the right to respond with supporting documentation, and that older tax arrears will not be pursued provided affected traders register under the GST Act (with businesses dealing exclusively in exempted goods excluded) and begin complying with tax obligations; officials also committed administrative assistance and withdrawal of notices where replies or exemptions are convincing.