Daijiworld Media Network – Bengaluru

Bengaluru, July 13: In the wake of GST notices served to small businesses, including tea stalls, bakeries, salons, and hotels across Karnataka, tax consultants and GST experts have urged traders to respond promptly to avoid penalties and interest. The notices, based on UPI transactions exceeding Rs 40 lac per annum, have sparked widespread concern among small-scale entrepreneurs.

Experts clarified that businesses accepting payments via UPI, even if unregistered under GST, have had their transaction data reviewed by the Commercial Tax Department. Notices have been issued to those whose digital transactions exceeded Rs 40 lac annually for goods or Rs 20 lakh for services, as per GST regulations.

'Respond immediately to notices' – GST experts

M Chandrashekhar of Regina GST Consultants, Bengaluru, stated, “Those who receive GST notices must reply within the given timeline. While there is no requirement to pay taxes immediately, responding with accurate transaction details—either online or by appearing at the GST office—can help avoid penalties.”

He further explained that not all business transactions may be taxable under GST. “Identifying which items attract GST can significantly reduce tax liability. For example, essential goods like bread are tax-exempt, while packaged snacks incur 5% GST.”

Option to register under composition scheme

Tax expert Madhukumar D of U Rao & Associates emphasized that traders exceeding the threshold turnover should register under GST without delay. “Those with annual turnover below Rs 1.5 crore can opt for the GST Composition Scheme. They will only be liable to pay 1% tax on turnover and can avoid further legal issues.”

However, he cautioned that opting for the composition scheme means traders cannot claim input tax credit. “But for small businesses, the lower overall tax burden is a major advantage,” he added.

Department clarifies on UPI-based GST notices

Amid the confusion, the Commercial Tax Department had earlier issued a clarification to assure small traders. The department confirmed that many notices were sent to businesses where UPI receipts alone exceeded Rs 40 lakh annually—suggesting even higher turnover when cash and other payment methods are included.

The department emphasized that it is not unfairly targeting small traders. A senior official said, “We only require those crossing the Rs 40 lakh threshold to comply with GST rules. If their total turnover is under Rs 1.5 crore, they can register under the Composition Scheme and continue their business smoothly.”

The UPI transaction data used for issuing notices was sourced from service providers for financial years 2021–22 to 2024–25. This data helped identify traders who had crossed the threshold but remained unregistered or failed to pay GST.

Advice to traders

Experts and the department have jointly urged affected traders to:

• Respond to GST notices within the specified deadline.

• Register under GST if eligible.

• Choose the Composition Scheme if annual turnover is below Rs 1.5 crore.

• Ensure correct classification of taxable and non-taxable goods/services to avoid excess tax payment.

For more information and registration, traders can visit the official portal: gst.kar.nic.in.

This consolidated guidance and clarification bring much-needed relief to small traders worried about legal consequences and financial burden arising from sudden GST notices.