I mean this sounds like an edgecase, which is good tradeoff for the ~billion of people who this system is designed for.

Essentially UPI was there to stop the industrial fraud and money laundering that was going on india. I have not actually checked the efficacy of this though. The last time I checked was when modi made the largest bank note not legal tender.

That part aside it does sounds like VAT (a 20% sales tax on all purchases) but for transactions.

It affects everyone who visits India, so it's not really an edge case. I'm sure there are plenty of towns in India that is primarily tourism-based.