GST Notice to Small Traders using UPI for Crossing Registration Threshold
GST Notice to Small Traders using UPI for Crossing Registration Threshold
Many Tax officials met the small traders and business owners on Monday, who were stressed due to the issuance of notices. The Commercial Taxes Department had earlier investigated many small traders and business owners who use UPI for receiving payments but still do not pay GST on UPI transactions over the last four years. Such traders can only get relief if both the State and Central governments come to an agreement on how to resolve the issue.
The Department estimates that it has issued notices to more than 10,000 businesses over UPI-based transactions. However, officials say it is not easy for the government to waive or cancel the tax dues, penalties, or interest involved.
According to data from PhonePe and Paytm, notices have been sent to traders who sell goods and have crossed Rs 40 lakh in UPI transactions per year, as well as those giving services with transactions over Rs 20 lakh annually. While the transactions made through Google Pay are still being reviewed.
A senior official from the Commercial Taxes Department explained that as GST dues can be claimed for the past four years, the department started issuing notices from the 2021-2022 financial year up to January 2025, when they received the transaction data.
As per the Deputy Chief Minister D.K. Shivakumar, the actual number of notices might be around 14,000. He added that the State plans to request the Central government to cancel these notices and blame the BJP for the situation.
As per an official, any decision must be taken by both the State and Central governments through the GST Council, as the issue involves both State and Central GST. The official also mentioned that trade associations and business groups could submit petitions to the government, as many small traders are unable to pay taxes for past years.
The Joint Commissioner of Commercial Tax, Meera S. Pandi, gave relief to the taxpayers by assuring them that the notices would be withdrawn if the business supplied exempted goods. She asked the traders not to worry, as notices are sent just for communication. The department will first listen to the traders’ side and assess their case thoroughly before making any final tax demands, she added. She stated that there is no intention of giving trouble to the traders behind the tax demand.
Speaking about the 18% GST demand in the notices, she clarified that once traders submit their documents and transaction details, the final tax amount could be reduced, but it will not be increased.
Due to the criticism from the trading community, the department has now changed the format of the notices. Earlier, notices included detailed transactions and an estimated tax liability at 18% GST, along with interest and penalties. Now, the notices only inform traders that their aggregate turnover has crossed the specified limit of Rs 40 lakh, and they need to register under the GST law.
S. Pandit also noted that similar actions are being taken in states like Gujarat, Tamil Nadu, and Andhra Pradesh. Even though the notices ask traders to respond within 7 to 10 days, there will be enough time given. Traders will receive up to three reminders, and officials will also make phone calls. If proper documents are not available, the department will make an assessment based on its best judgement.