Introduction
The GST relief for small vendors is back in focus as the GST Council considers easing compliance burdens. But a parallel issue is rising—many merchants are avoiding UPI payments to sidestep GST scrutiny. This shift could hurt digital adoption and tax transparency. Let’s break down what’s really going on.
What’s Prompting the GST Relief Talk?
- Post-2023, GST authorities ramped up AI-based scrutiny
- Thousands of small vendors received DRC-01 notices for past non-compliance
- Many notices are technical or linked to mismatch issues
- Traders’ associations across states raised concerns
- GST Council, in its recent meets, hinted at possible relief measures
Possible Relief Proposals Under Discussion:
| Proposed Measure | Expected Benefit |
|---|---|
| Amnesty for past returns (like GSTR-4) | Clear old dues without heavy penalty |
| Exemption/relaxation for vendors <₹20L | Avoid harassment of genuinely small vendors |
| SOP for cancellation and revocation | Help rejoin GST with simpler process |
| AI-based notice filtering | Reduce incorrect or low-risk notices |
Why Are Small Merchants Avoiding UPI?
A strange consequence of the GST notice wave:
- Vendors now fear UPI trails = GST notices
- Some businesses demand cash only, fearing digital footprints
- Income tax and GST databases are linked, increasing paranoia
- Small traders often lack proper records or consultants
Expert View:
“Digital payments shouldn’t be penalised with disproportionate scrutiny. If the system punishes transparency, it’ll regress.” — CA Yash Mehta, Tax Policy Analyst
Legal View: Can GST Be Applied Just for Accepting UPI?
No. Here’s what the law says:
- UPI is only a payment mode, not a business activity
- GST applies only if turnover crosses threshold (₹40L for goods, ₹20L for services, or ₹10L in special category states)
- Accepting UPI doesn’t automatically mean GST liability
- However, high digital trails may trigger profiling
Reference:
- Section 22, CGST Act, 2017 – Registration based on aggregate turnover
- CBIC FAQ (Nov 2020): UPI or card acceptance doesn’t imply registration obligation unless threshold met
Impact: Digital India vs Compliance Fear
| Aspect | Intended Outcome | Ground Reality Today |
|---|---|---|
| UPI Push by Govt | More transparency | Merchants quietly going cash-only |
| GST Notices to Clean Up | Better tax base | Small vendors feel targeted, overburdened |
| AI-Scrutiny | Smarter governance | Lack of context triggers confusion |
How Efiletax Can Help
- DRC-01 reply support: Expert help in drafting and replying
- Old GST returns filing: Use amnesty if announced
- GST health check: Quick scan to assess risk exposure
- UPI risk advisory: Guidance for digital merchants
Summary
GST relief for small vendors is being discussed by the GST Council amid rising GST notices. However, many merchants are now discouraging UPI to avoid tax scrutiny. Here’s how to manage compliance without ditching digital.
FAQs
Q1: Can I accept UPI without registering under GST?
Yes, if your turnover is below the threshold limit, registration is not mandatory—even if you accept UPI or cards.
Q2: Will a GST amnesty scheme be launched again?
The Council is considering targeted relief measures, but formal notification is awaited.
Q3: I got a GST notice but never registered. What to do?
Reply under principles of natural justice. Efiletax can help you draft a response or opt into Composition Scheme, if eligible.
Call to Action
Facing a GST notice or unsure if your UPI use could trigger scrutiny?
Talk to our GST experts at Efiletax.in for personalised support. Don’t let fear undo your digital growth.