The Karnataka Commercial Tax Department has clarified recent media reports concerning notices issued to small traders regarding Goods and Services Tax (GST) compliance. The department initiated this action by collecting Unified Payments Interface (UPI) transaction data from various service providers for the financial years 2021-22 to 2024-25. These notices target traders whose UPI receipts alone exceeded Rs 40 lakh, indicating a potentially higher overall annual turnover when factoring in cash and other transaction modes.
Under Section 22 of the GST Act, which came into effect on July 1, 2017, GST registration is mandatory for suppliers of goods with an aggregate annual turnover exceeding Rs 40 lakh, or for service suppliers exceeding Rs 20 lakh. This aggregate turnover includes both exempted and taxable goods and services, though tax liability only applies to the latter. For instance, while bread sales are exempt, snacks may incur a 5% tax. The department’s notices require recipients to provide details of their sold goods and services to ensure correct tax payment. Traders who receive such notices and meet the turnover thresholds are required to register immediately. The department also highlighted that small traders with an annual turnover below Rs 1.5 crore have the option to choose a compromise tax scheme, allowing them to pay a reduced 1% tax going forward. Further information about the Goods and Services Tax Act is available on the department’s website, https://gst.kar.nic.in/.
Views by CA Siddharth Surana:
The case of the Karnataka vegetable vendor receiving a GST notice possibly through sales effected using UPI illustrates the evolving landscape of GST, which is transparent, data driven and encouraging more formalisation of the economy. The Government has been making a push for digital payments as a part of the Digital India campaign and UPI has been one of the success stories of the government. UPI has enhanced traceability of transactions and in recent times, there has been the sharing of UPI data with the tax authorities. This has led to several persons receiving notices even though they are not presently registered under GST. The detection of these transactions has also broadened the tax base. The possibility of GST notices also extending to other regulations such as income tax cannot be ruled out.
It is also surprising that vegetable vendors are receiving a notice given that most fresh fruits and vegetables are exempted from GST.
While broadbasing the tax base and enhanced collections are encouraging, it is important to acknowledge that many small vendors and micro-enterprises, especially those newly entering the formal economy, often lack the infrastructure or understanding required for proper GST accounting and compliance. For such individuals, the transition from informal to formal systems can be overwhelming, both administratively and financially. Many of these vendors are unable to deal with the compliance burdens and find it unviable to meet the costs of compliance.
This does create a case whether there is a need to revise the GST thresholds for registration and reporting of transactions to the tax authorities. In our view, with the rising GST collections and cost of compliances (especially for small vendors) there is a need to revisit the GST thresholds for registration. There is also a need to increase taxpayer education especially among the new entrants to the GST universe, to increase acceptability of GST.
Goods and Services Tax
Press release
Many TV and print media outlets in Karnataka have reported on the notices issued by the Commercial Tax Department to small traders. The Commercial Tax Department has provided the following information regarding this.
The Goods and Services Tax Act has come into force across the country from July 1, 2017. Under Section 22 of the Act, if the aggregate turnover of a supplier of goods exceeds Rs 40 lakh in a financial year or if the aggregate turnover of a supplier of services exceeds Rs 20 Iakh in a financial year, it is mandatory to get GST registration. This aggregate turnover includes exempted & Taxable goods and services. But the tax liability is applicable only to Taxable goods & services. The tax liability is determined according to the goods sold. (For example, there is no tax on the sale of bread. There is a tax liability of 5% on snacks).
The Commercial Taxes Department has collected the details of the money received by traders through Unified Payments (UPI) from various UPI service providers from 2021-22 to 2024-25. Traders receive money not only through UPI but also in cash and other modes. Therefore, the annual turnover of traders who have received money more than Rs 40 Iakh through UPI is still significantly higher. After verifying the said information, notices have been issued to traders who have received money more than Rs 40 lakh and have not registered and paid tax under the Goods and Services Tax Act – 2017. In response to these notices, the traders have to provide details of the goods and services they have sold and pay the correct tax.
Such traders will have to get registered immediately. Small traders with an annual turnover of less than Rs 1.5 crore can opt for the compromise tax and henceforth pay 1% tax.
Information on the Goods and Services Tax Act is available on the department’s website.
Available at https://gst.kar.nic.in/.
Additional Commissioner of Commercial Taxes
(Central Office)-1, Bangalore. Additional
Commissioner of Commercial Taxes
I have a question on this, who give rights to access personal information? do tax offers informed outlets before accessing thier account. today for me to access need a OtP and password.
TAx officers must visit outlet and chek and educate the person instead indirectly accessing accounts and sending a notice. tomorrow name tax officers they can misuse the account.
this is way of accessing bank information is completely wrong.