Unregistered small biz, UPI trades face new scrutiny under GST scanner

Amid rising concerns over tax evasion, unregistered vendors and small businesses conducting high-value transactions via UPI and cash are now under increased GST scrutiny. States like Karnataka have already issued numerous notices, and others are preparing to follow suit, according to sources.

Central and state GST authorities have approached payment aggregators to collect data on businesses receiving more than ₹20 lakh annually through digital or cash payments. This move targets those operating outside the formal tax network, especially in sectors known for high cash usage.

While state officials are conducting their own analyses, the central GST department has instructed field officers to map sectors and regions with significant informal economic activity. They’ve been asked to focus on markets where cash transactions dominate and initiate outreach efforts to encourage GST registration among such businesses.

A circular from the central GST department dated June 24 highlighted the need to bring these cash-heavy sectors under the tax net. Following this, central officials in multiple zones have begun seeking data from payment platforms to pinpoint unregistered businesses exceeding the GST threshold. As of now, no formal notices have been issued by the Centre.

A government source explained, “Cash-based transactions and unregistered trade are under enhanced scrutiny. GST officers are analysing UPI data to identify recipients who exceed the ₹20 lakh threshold. Notices will soon be sent to those either unregistered or showing unrealistically low tax payments despite high receipts.”

The crackdown is part of a larger effort to formalize the informal sector and ensure broader tax compliance across states.