GST notice: State and Centre have to agree on reprieve for small traders

The Hindu

21-07-2025

Small traders and businessmen, who have come under the lens of the Commercial Taxes Department over the non-payment of Goods and Services Tax (GST) over the last four years for UPI transactions, can get a reprieve only if the State and the Central governments agree to a solution.
While the department is learnt to have issued notices to over 10,000 businesses based on the UPI transactions, it is difficult for the government to waive the penalty/interest or the tax burden, department officials say.
Deputy Chief Minister D.K. Shivakumar claimed that the number of notices could be about 14,000, and said that the State would write to the Centre to withdraw notices, and blamed the BJP for the current problem.
'Both governments have to decide in the GST Council on the future course of action since both the State and the Central GST are involved,' an official said, adding that trade bodies and associations could petition the government over the inability of traders to pay tax retrospectively.
Based on information from PhonePe and Paytm, traders offering goods and who have exceeded ₹40 lakh in UPI transactions per annum and those offering services and who have exceeded ₹20 lakhs in transactions per annum have been issued the notices. Sources said that Google Pay transactions are yet to be assessed.
'Because the tax liability can be flagged for the previous four years, the notices have been issued from 2021-2022 and till January 2025 when the department received data,' a senior Commercial Tax official explained.
On Monday, officials also interacted with anxious small traders, who came to clarify their doubts, and explained the reason behind issuing the notices.
'Notice is a mode of communication or an intimation. Traders need not be worried. If exempted goods were handled, the notices will be withdrawn. The department will hear from traders and businesses will be assessed before the tax demand is issued,' Joint Commissioner of Commercial Tax Meera S. Pandit told the audience.
The exempted goods include vegetables, fruits, flowers, milk, unbranded or unpacked foodgrains, handicrafts, petrol, diesel, and liquor. If the trader is selling other than exempted goods in his shop, the GST will apply to those goods only, the department has clarified.
On the 18% GST demand raised in the notices, the official clarified: 'Based on the documents provided on the transactions and other information, the final tax demand could come down. The demand can only be lowered but not increased when the demand order is issued'.
She pointed to similar exercises being carried out in Gujarat, Tamil Nadu, and Andhra Pradesh. 'Though the notices have asked the traders to respond within seven or 10 days, sufficient time would be provided. Three reminders will be sent and officials will also call the trader on phone. The assessment will be based on the best judgment and closer to reality if documents cannot be provided. The tax demand is not to trouble anyone or dip into profits,' Ms. Pandit said.
Meanwhile, after the outcry by traders, the department has changed the format for issuing notices. While initial notices provided details of transactions, possible tax liabilities at the rate of 18% GST, interest and penalty, currently notices are being issued to traders, intimating them of transaction of over ₹40 lakh, which requires registration under the GST regime.