Govt won't pursue tax arrears on exempt goods, says CM Siddaramaiah

The Karnataka government has announced that it will not pursue tax arrears demanded from traders for exempted goods and services over the past two to three years, reported news agency PTI.

 

The move came after widespread concerns over tax notices issued based on Unified Payment Interface (UPI) data, which had prompted traders to plan a strike on July 25.

 

“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," Chief Minister Siddaramaiah said on Wednesday, as quoted by PTI.

 

According to the Commercial Taxes Department, around 6,000 notices were issued across Karnataka, based on data from UPI transactions. These notices reportedly included transactions that were personal or loan-related, causing confusion among smaller traders. 

 

Some trade associations had earlier called for a boycott of UPI payments, alleging that the digital trail was being misused to issue retrospective tax claims.

 

However, following Siddaramaiah's assurance, traders agreed to withdraw the planned protest.

 

“I told the traders not to go on strike or stage a demonstration at Freedom Park. They have agreed to withdraw their agitation,” Siddaramaiah said.

 

GST registration required

 

The CM clarified that while past notices would be dropped, traders would still need to register under the Goods and Services Tax (GST) framework to avoid future issues.

 

“Traders must register. Registration is mandatory because everyone needs to be brought within the tax net,” he said. However, he added, “Businesses dealing exclusively in exempted goods will not be required to register.”

 

The exempted items include bread, milk, essential food items, fruits and vegetables, flowers, and tender coconut, Siddaramaiah said.

 

In a statement, the CM also clarified that the tax department had issued notices only to traders whose UPI transactions exceeded ₹40 lakh, with the aim of encouraging registration, reported PTI.