On July 25, amid a statewide shutdown called by small traders in protest against GST notices on digital payments, the Karnataka Commercial Taxes Department clarified on July 17 that GST registration is mandatory for businesses with an annual turnover exceeding ₹40 lakh (for goods) or ₹20 lakh (for services), regardless of the mode of payment.
According to Section 22 of the Goods and Services Tax Act, 2017, GST registration is mandatory for any business with an annual turnover exceeding ₹40 lakh (for goods) or ₹20 lakh (for services), regardless of the mode of payment—be it cash, UPI, POS, bank transfer, or any other method.
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Against discontinuing digital payments such as UPI in reaction to the notices, the department cautioned, “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 expressed, citing that measures to recover dues from tax evaders shall be opted.
The department for the businesses registered under the regular GST scheme said that the tax shall be applicable only on the taxable goods and services, with the net tax subject to be filed computed after ITC, lessening the burden.
Businesses having a turnover less than Rs 1.5 crore may choose the composition scheme, which offers a flat 1 per cent tax (0.5 per cent SGST + 0.5 per cent CGST). Before the registration, the same scheme shall not be applied retrospectively to the turnover.
“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,” as per the statement.
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Under the composition scheme 98,915 taxpayers are presently there in Karnataka. The department mentioned that the notices should be issued to fewer than 10% of them, and kept that most of the traders are following the norms of GST.
Press Release by Karnataka Tax Department
