In a recent Lok Sabha session, Finance Minister Nirmala Sitharaman addressed concerns raised by BJP MPs K Sudhakar and Tejasvi Surya regarding the issuance of GST notices to small traders and street vendors. The Minister categorically stated that Central GST authorities have not issued any notices based on UPI transactions, dispelling fears among small businesses about heightened tax scrutiny linked to digital payments.
The issue gained attention last month when Karnataka issued a series of GST notices to unregistered vendors and small businesses, urging them to register under GST to surpass the registration threshold. These notices flagged businesses receiving payments exceeding Rs 40 lakh annually for goods or Rs 20 lakh for services via cash, UPI, or POS machines. This led to a significant backlash, with many small vendors in Karnataka refusing UPI payments to avoid tax authority scrutiny.
Responding to queries about potential systemic flaws in the GST Department contributing to tax evasion, Sitharaman firmly denied any such issues. She shared data highlighting GST evasion cases in Karnataka, noting 1,254 cases involving Rs 39,577 crore in 2024-25, compared to 925 cases worth Rs 7,202 crore in 2023-24 and 959 cases worth Rs 25,839 crore in 2022-23.
Reports revealed that Central and state GST authorities had approached payment aggregators to access data on businesses receiving over Rs 20 lakh annually for data analysis on unregistered and cash-based trade. A June 24 directive from Central GST authorities instructed field officers to identify cash-heavy sectors, map informal economic activity in specific markets, and engage with local business associations to encourage GST registration. Despite these efforts, officials clarified that no notices were issued by Central GST authorities based on this data.
Under GST regulations, businesses with an all-India aggregate turnover exceeding Rs 40 lakh for goods (Rs 20 lakh in certain states like Arunachal Pradesh, Manipur, and others) or Rs 20 lakh for services (Rs 10 lakh in states like Manipur, Mizoram, Nagaland, and Tripura) must register for GST. The recent clarification from the Finance Minister aims to reassure small businesses, particularly those reliant on digital payments, that UPI transactions alone are not triggering tax notices.
This development underscores the government’s focus on balancing tax compliance with supporting small businesses, ensuring that the GST framework does not unduly burden informal vendors while addressing tax evasion.
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