SBI warns that aggressive tax enforcement targeting small businesses could reverse gains made through formalisation under GST.
Key Issue
Such enforcement may push informal players back into the cash-based economy.
Example
A recent case from Karnataka creates tension, where small traders and shopkeepers in Bengaluru received high tax notices based on UPI transactions.
SBI's View
While the intent to capture a more accurate picture of economic activity and reduce tax evasion is commendable, such enforcement must be balanced with sensitivity. The risk is that overly aggressive scrutiny could drive small businesses back into the informal cash-based economy, undermining the very purpose of formalisation.
While tracking digital payments helps in economic transparency and tax collection, overreach could backfire.
Excess scrutiny could discourage small businesses from using digital methods, thereby undermining GST's purpose.
Importance of Inclusive Formalisation
GST has laid the foundation for greater accountability and revenue generation, but its long-term success will depend on ensuring that it empowers businesses, especially small traders, instead of penalising them.
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