GST applies to taxable turnover, even if paid in cash: Karnataka Commercial Taxes Dept clarifies

Small merchants wary of UPI payments

Amid a statewide shutdown call by small traders on July 25 over GST notices on digital payments, the Karnataka Commercial Taxes Department on July 17 clarified that GST registration is mandatory for businesses with annual turnover above Rs 40 lakh (goods) or Rs 20 lakh (services), regardless of payment mode.

In a press note dated July 17, the department clarified that GST registration is mandatory under Section 22 of the Goods and Services Tax Act, 2017, for any business with an annual turnover exceeding Rs 40 lakh (for goods) or Rs 20 lakh (for services), regardless of the mode of payment - be it cash, UPI, POS, bank transfers, or others.

Also, read: After Karnataka, four more states request merchant transaction data from UPI apps

The department warned against discontinuing digital payments such as UPI in reaction to the notices. “GST is applicable on consideration received in any form. UPI is merely a mode of receipt. All transactions-whether digital or in cash-are liable under GST,” the statement said, adding that appropriate action would be taken to recover dues from tax evaders.

For businesses registered under the regular GST scheme, the department reiterated that tax is applicable only on taxable goods and services, with the net tax payable calculated after input tax credit- effectively reducing the burden. Businesses with turnover below Rs 1.5 crore may opt for the composition scheme, which offers a flat 1 percent tax (0.5 percent SGST + 0.5 percent CGST). However, this scheme cannot be applied retrospectively to turnover before registration.

Also, read: Karnataka’s GST evasion notices prompt shopkeepers to turn down UPI payments

“Officials have been instructed to assist traders, verify documents submitted in response to the notices, and ensure that tax is levied only on taxable turnover. Traders are urged not to panic and to submit their responses to the offices from which they received the notices,” the statement said.

Currently, 98,915 taxpayers in Karnataka are registered under the composition scheme. The department noted that notices have been issued to fewer than 10 percent of them and maintained that most traders are complying with GST regulations, it adds.

Also, read: Karnataka commercial tax dept targets traders evading GST despite over Rs 40 lakh UPI annual earnings