GST on UPI Turnover: What Small Traders Must Know
In July 2025, GST notices targeting UPI turnover above ₹40 lakh have triggered panic among small traders, especially in Karnataka. The confusion? Most believe digital payments like UPI don’t attract GST. But GST isn’t on UPI—it’s on business turnover, regardless of how the payment is received.
Let’s break down what’s happening, what the law says, and how you can stay safe.
Why Are GST Notices Being Sent for UPI Turnover?
The recent enforcement drive by GST authorities has focused on small businesses with significant digital transaction trails—primarily via UPI.
- Focus is not on UPI as a mode but on the total value of business transactions.
- Many traders crossed ₹40 lakh in receipts but hadn’t registered for GST.
- CBDT and GSTN are using UPI + PAN data to detect non-filers.
📌 Example: A street vendor receiving ₹3,000/day on UPI for a year = ₹10.95 lakh annual turnover. If many such vendors earn more than ₹40 lakh but are unregistered, it invites scrutiny.
What Does the Law Actually Say?
Under Section 22 of the CGST Act, 2017, a person is liable to register under GST if:
- Aggregate turnover exceeds ₹40 lakh (₹20 lakh for some states)
- This includes all modes of payment – cash, UPI, card, etc.
- The threshold is ₹10 lakh for NE & hill states
🔍 Turnover includes:
- Sale of goods
- Services
- Exempt + taxable + interstate supply
📄 Legal Reference:
Section 2(6), CGST Act – “aggregate turnover” includes all taxable supplies (excluding GST itself), exempt supplies, exports, and interstate supplies.
Common Misunderstanding: UPI = Taxable?
No. UPI is just a payment method.
But if UPI receipts reflect unreported business income, GST applies.
🚫 Not taxable: Personal transfers, gifts, reimbursements
✅ Taxable: Business receipts, even if not invoiced
So, even if you didn’t raise an invoice, GST can apply if you’re running a business and cross the threshold.
Are Street Vendors and Kirana Stores Liable for GST?
Not always. It depends on turnover and nature of supply.
Exempt from GST if:
- Annual turnover < ₹40 lakh (goods) or < ₹20 lakh (services)
- No interstate supply
- Not selling on e-commerce platforms
- Not dealing in taxable services like renting, coaching, etc.
💡 Expert Tip:
If your UPI shows high turnover but actual taxable turnover is below threshold, keep a cash book and ledger to prove it. GST law puts burden of proof on you.
Why Karnataka Traders Are Protesting
- Many small traders got show cause notices asking why they haven’t registered for GST.
- They claim they didn’t know UPI totals would be tracked as business turnover.
- Some received notices even though they weren’t selling taxable goods.
A statewide bandh is planned on 25 July 2025 unless CBIC rolls back the notices.
How to Respond If You Get a GST Notice for UPI Turnover
✅ Step 1: Don’t panic.
✅ Step 2: Gather bank and UPI statements, daily cashbook, and bills.
✅ Step 3: File a reply within 15 days through GST portal (if SCN issued).
✅ Step 4: Consult a CA or tax consultant.
Efiletax helps you file SCN replies, get GST registration, and maintain books for digital payments. Contact us for quick help.
How to Avoid Future GST Trouble If You Accept UPI
- Keep daily records: sales, cash, UPI receipts
- Use a simple billing app that tracks GST turnover
- Register under Composition Scheme if your turnover is under ₹1.5 crore
- File NIL GST returns if applicable to avoid penalty
- Don’t mix personal and business UPI accounts
GST Thresholds at a Glance
| Type of State | Goods Threshold | Services Threshold | Composition Limit |
|---|---|---|---|
| Normal States | ₹40 lakh | ₹20 lakh | ₹1.5 crore |
| NE/Hill States | ₹10 lakh | ₹10 lakh | ₹75 lakh |
Practical Takeaway
GST is not about how you get paid. It’s about how much and what you sell.
UPI is transparent—but if your records aren’t, expect problems.
Don’t stop using digital payments. Just keep your records clean.
FAQs
Q1. Is receiving ₹50,000/month on UPI taxable under GST?
Only if it’s for business and your annual turnover > ₹40 lakh. Otherwise, no.
Q2. Are cash sales safer than UPI?
Legally no. Both are equal in GST law. UPI is easier to track, that’s all.
Q3. Can I reply to the GST notice myself?
You can, but we strongly advise using a consultant to avoid errors.
Q4. What if some of the UPI money is from personal sources?
Maintain a record to prove the source. Family transfers or rent receipts must be documented.
Summary
GST on UPI turnover isn’t about digital payments—it’s about business income. If your total receipts cross ₹40 lakh, you may need GST registration. Traders must maintain records and respond to notices promptly. Learn the rules and protect your business with Efiletax support.
Conclusion: Keep Selling, Stay Compliant
UPI is a great tool—but tax ignorance can cost you. As GST enforcement tightens, it’s better to play safe.
💡 Need help with a GST notice or registration?
Efiletax offers fast, affordable GST support for traders and small businesses. Book your consultation today.