GST Notice for UPI Transactions Without Registration: Everything You Need to Know
With digital payments becoming the norm, many businesses use UPI platforms like GPay, PhonePe, and Paytm to collect revenue. However, what many don’t realize is that the GST department actively tracks UPI transactions.
If your total transactions exceed the GST threshold, but you haven’t registered under GST, you may receive a notice from the GST department. These notices serve as warnings, urging businesses to comply with tax laws.
Let’s break down the GST rules, penalties, exemptions, and steps you must take if you receive such a notice.
Why Are Businesses Getting GST Notices for UPI Transactions?
The Goods and Services Tax (GST) authorities monitor high-value UPI transactions through reports from banks and digital payment platforms. If your total UPI transactions exceed the GST threshold but you are not registered for GST, the department may issue a notice demanding compliance.
This measure is intended to curb tax evasion and ensure that businesses collecting revenue through digital means fulfill their tax obligations.
GST Exemption Limit: Do You Need to Register?
Not every business needs to register for GST. The GST exemption limit varies based on the type of business and location:
| Business Type | Normal Category States | Special Category States |
|---|---|---|
| Sale of Goods | ₹40 lakh | ₹20 lakh |
| Providing Services | ₹20 lakh | ₹10 lakh |
💡 Special Category States include North Eastern states, Himachal Pradesh, Uttarakhand, and Jammu & Kashmir.
📌 Key Takeaway: If your UPI transactions exceed these limits, you must register for GST, even if your revenue comes entirely from UPI payments.
Mandatory GST Registration: Who Must Register Regardless of Turnover?
Even if you don’t exceed the turnover threshold, you must register for GST if:
✅ You sell goods/services across state lines (Interstate suppliers).
✅ You operate as an e-commerce seller (Flipkart, Amazon, etc.).
✅ You are a casual taxable person (occasional business transactions).
✅ You are a non-resident supplier of goods or services.
✅ You provide services under reverse charge mechanism.
✅ You are required to deduct TDS or TCS under GST.
💡 Example: If you sell handmade crafts and receive payments via UPI from customers across different states, you are legally required to register for GST, even if your turnover is below the threshold.
GST Penalties for Not Registering
If you fail to register under GST despite exceeding the limit, strict penalties apply:
| Non-Compliance | Penalty |
|---|---|
| Not registering for GST after crossing the threshold | 100% of tax due or ₹10,000, whichever is higher |
| Failure to collect and pay GST on taxable sales | 10% of tax due (minimum ₹10,000) |
| Delayed GST registration | Interest on outstanding tax amount |
| Repeated non-compliance | Business operations may be suspended |
🔴 Ignoring GST notices can lead to legal action, financial penalties, and even business closure!
How to Respond to a GST Notice for UPI Transactions?
If you receive a GST notice regarding UPI transactions, follow these steps:
Step 1: Log into the GST Portal
- Visit www.gst.gov.in
- Use your GSTIN (if registered) or PAN to log in.
Step 2: Check the Notice Details
- Go to ‘Services’ → ‘User Services’ → ‘View Notices & Orders’.
- Download and read the notice carefully.
Step 3: File Your Response
- If you haven’t crossed the GST threshold, submit an explanation with proof of turnover.
- If you have exceeded the limit, register for GST immediately and file any pending tax returns.
Step 4: Seek Professional Help
- If the notice is complicated, consult a tax expert to avoid mistakes in your response.
🚀 Tip: Always maintain digital transaction records to avoid unnecessary scrutiny.
GST Composition Scheme: A Simple Option for Small Businesses
If you are a small business with turnover under ₹1.5 crore, you can opt for the GST Composition Scheme.
Benefits of the Composition Scheme
✅ Lower tax rates (1% for traders, 5% for restaurants, 6% for service providers).
✅ No need to file monthly GST returns (only quarterly payments and one annual return).
✅ Simplified compliance and record-keeping.
🔴 Who is NOT eligible?
❌ Businesses involved in interstate sales.
❌ Service providers (except those with turnover under ₹50 lakh).
❌ E-commerce sellers.
How to Check If Your Business Exceeds the GST Threshold?
To determine if you must register for GST, calculate your aggregate turnover, which includes:
✅ Revenue from sales & services (domestic transactions).
✅ UPI and digital payments collected from customers.
✅ Export earnings (even if GST is zero-rated).
✅ Interstate sales (even if within GST exemption limits).
💡 Excluded from GST Turnover Calculation:
❌ Government subsidies
❌ Interest income
❌ Capital gains
🔍 Pro Tip: Check your total digital transactions on UPI platforms and maintain records to avoid discrepancies.
Final Thoughts: Stay Compliant & Avoid GST Notices
With tax authorities actively monitoring UPI transactions, it’s crucial for businesses to stay GST compliant.
✔ Check your turnover regularly to determine if GST registration is necessary.
✔ Maintain records of UPI payments to justify exemptions (if applicable).
✔ Register for GST on time to avoid penalties and legal issues.
✔ If you receive a GST notice, respond promptly to avoid complications.
🚀 Taking proactive steps today will save you from bigger problems tomorrow!
CA Study Shop provides classes & books for CA CS CMA Students. We have partnered with more than 100 top faculties of country and provide excellent customer support which is evident from our 4.9/5 star rating on Google. Student can connect with us via any mode here.
Best of luck!
Stay Connected for more authentic updates.
Jai Hind,Vande Mataram
Team CA Study
