Should UPI data be used to track GST evaders?
Recently, the writer was involved in arranging a close family wedding. Large sums had to be paid to a long list of vendors providing services including lights, decorations, flowers, video, photo, catering, wedding gifts, and so on. What was surprising was that all these vendors preferred receiving money through UPI. With growing digitisation of payments, no one likes handling large amounts of cash any more. But it was also obvious that these vendors were under the misconception that receiving money through UPI was akin to receiving cash payments — no trail, no questions asked.
The small traders in Karnataka who are up in arms against tax authorities appear to have been harbouring similar erroneous ideas. The Karnataka Department of Commercial Taxes had mined UPI data for the period between 2022 and 2025 to identify small businesses receiving UPI payments above the GST exemption threshold. A flurry of notices were sent to thousands of small vendors, including flower, vegetable and fruit vendors, renewing protests about ‘tax terrorism’ and harassment of poor vendors.
The possibility of tax officials using UPI data to identify tax evaders has been present for some time. Given that over Rs.80,000 crore of UPI transactions are put through every day, tax officials now have access to a treasure trove of data. But it is also true that the usage of UPI has recorded stellar growth because many seem to think that it leaves no trail. Once they become aware of this, usage of UPI can drop. To use or not to use the UPI data, that’s the quandary before the government.
