With transactions of small businesses under the tax scanner, the Ministry of Finance on Monday stated that the Central GST authorities have “not issued any notices based on UPI transactions”.
In response to a question asked by BJP MPs K Sudhakar and Tejasvi Surya in Lok Sabha on whether the Government has issued GST notices to small traders and street vendors in the country without assessment of their business activities including Karnataka, Finance Minister Nirmala Sitharaman said, “No. Central GST authorities have not issued any notices based on UPI transactions.”
On the query of whether such evasions are due to systemic flaws within the GST Department, the Finance Minister replied in the negative. Data by central tax formations for Karnataka shared by the Finance Minister in Lok Sabha showed that 1,254 GST evasion cases involving detected amount of Rs 39,577 crore were registered in 2024-25. This was higher than 925 cases with detected amount of Rs 7,202 crore in 2023-24 and 959 cases with detected amount of Rs 25,839 crore in 2022-23.
The issue of Goods and Services Tax (GST) notices to small businesses came to the forefront last month after Karnataka sent a spate of notices to unregistered vendors and small businesses, asking them to register under GST for having breached the GST registration threshold. Several such notices in Karnataka had pointed out that such unregistered businesses had received payments by way of cash, UPI or POS machines exceeding Rs 40 lakh (for goods) or over Rs 20 lakh (for services) annually. The heightened scrutiny and the spate of notices to small businesses had a fallout — many small vendors were refusing to take UPI payments for fear of being tracked by the tax authorities.
The Indian Express had reported last month that Central and state GST authorities had reached out to payment aggregators, seeking data of those who received payments exceeding Rs 20 lakh per year to undertake data analysis on cash-based and unregistered trade. A missive sent by central GST authorities to its field officers on June 24 had asked officers to identify sectors that are prone to cash transactions, conduct geographical mapping to identify specific markets for informal economic activity, and undertake targeted outreach programmes to engage with local business associations and nudge them to register under GST. It had pointed out that a part of the economic activity still continues to operate outside the formal tax framework, particularly in sectors and markets where cash transactions dominate. However, officials maintained that no notices were sent by central GST authorities.
GST registration is mandatorily required if small businesses have all-India aggregate turnover above Rs 40 lakh in case of supply of goods (Rs 20 lakh if business is in the states of Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Telangana, Tripura and Uttarakhand) and Rs 20 lakh in case of supply of services or in case of mixed supplies (Rs 10 lakh if business is in states of Manipur, Mizoram, Nagaland and Tripura).
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