Merchants in Bengaluru Withdraw UPI Amid GST Concerns

In recent days, a rising number of small merchants in Bengaluru have reverted to accepting only cash, removing QR-based digital payment options. This shift stems from growing anxiety over Goods & Services Tax (GST) compliance, as many retailers fear digital transactions could trigger unsolicited government audits. Even as UPI continues to break global records, retail resistance signals that digitization at the grassroots level still faces significant structural and psychological barriers. For merchants operating on tight margins, the potential burden of retroactive compliance outweighs the convenience of digital tools.

This localized cash retreat has broader implications for India's digital payments ecosystem. UPI has been celebrated by policymakers and fintech firms as a transformative tool, enabling fast, secure, and transparent transactions. Yet when trust erodes among frontline economic actors, the system’s integrity becomes vulnerable. NPCI and regulators must now reconcile the drive for documentation with the practical realities of inclusive growth and merchant trust. Otherwise, the success of digital India may remain aspirational, rather than foundational, in emerging markets.

The unfolding dynamic highlights the critical interplay between tech infrastructure and policy design. UPI enhancements—such as faster response times and seamless reversals—address service-level trust but fail to mitigate compliance anxiety. Currency reform will require a holistic framework: one that includes training, compliance awareness, and supportive dispute mechanisms. Otherwise, digital payment expansion risks buckling under its own weight, leaving India’s fintech ambitions both technologically advanced and socioeconomically fragile.