GST Crackdown Targets 60,000 Unregistered Businesses Using UPI Trail — Exclusive

State GST departments in at least 6-7 states have issued notices to nearly 60,000 unregistered businesses found operating outside the tax net despite crossing the mandatory turnover threshold.

In addition to Karnataka, the GST department of Gujarat, Tamil Nadu, Andhra Pradesh asked unregistered businesses to cough up taxes running in lakhs.

The businesses under scrutiny are primarily in the business-to-consumer (B2C) segment, such as ice cream parlours, salons, small eateries, automobile parts vendors, and event management companies.

These sectors, often operating in semi-formal settings, are now facing mounting scrutiny for failing to register under the Goods and Services Tax regime, despite clocking significant revenues.

Investigations reveal that many of these businesses processed large volumes of payments via UPI platforms like Google Pay, Paytm, and BHIM. In several cases, annual digital transactions exceeded Rs 40 lakh, the threshold for mandatory GST registration for suppliers of goods, and Rs 20 lakh, the threshold for service providers.

Officials say the enforcement effort is based on integrated data analysis using digital payment records, income tax filings, and other financial disclosures. The mismatch between actual receipts and declared income has flagged thousands of potential tax evaders.

Under the GST Act, businesses exceeding the turnover threshold are legally required to register and pay taxes accordingly. Non-compliance can lead to backdated tax demands, penalties, interest, and in severe cases, prosecution.

Despite the rollout of GST in 2017, tax authorities estimate that lakhs of businesses across India particularly in the informal and cash-heavy sectors remain outside the GST system. Many accept digital payments but fail to declare full income, relying on outdated assumptions that small businesses can operate below the radar.

A senior official involved in the investigations said, “When a business shows UPI receipts of over a crore but has no GST registration or files nil returns, it becomes an obvious case for scrutiny.”

Businesses that have received notices are now required to respond with documentation proving lower turnover or initiate GST registration immediately. Failure to comply may lead to audit actions, tax recovery, and penalties under the law.

However, these actions did not go well with small traders across Karnataka who have warned of a statewide shutdown on July 25 in protest.