MM TAX CLUB

Small businesses and vendors play a vital role in the Indian economy, offering valuable goods and services to their communities. However, with increased digital transactions and stringent monitoring by tax authorities, even small-scale vendors, such as panipuri sellers, are finding themselves under the GST (Goods and Services Tax) radar. The recent case of a panipuri vendor receiving a GST notice highlights the need for small business owners to be vigilant about tax compliance.

What Happened?

A panipuri vendor in Tamil Nadu was issued a GST notice by the State Tax Officer for failing to register under GST. The notice, dated 17.12.2024, indicated that the vendor had received UPI payments exceeding ₹40,11,019 during the financial year 2023-24. According to GST laws, any business with an annual turnover exceeding ₹20 lakhs (or ₹40 lakhs for certain goods-only suppliers) is required to register under GST.

This vendor, despite crossing the threshold, failed to comply, leading to potential penalties under Section 122 of the CGST/TNGST Act, 2017.

Why Did the Vendor Receive a Notice?

1. Digital Payment Trails: With the rise of digital payment platforms like Razorpay and PhonePe, all transactions leave a digital footprint. Tax authorities use these reports to identify businesses with high turnovers that may not have registered under GST.

2. Exceeding Turnover Limits:

   • For services: GST registration is mandatory if the annual turnover exceeds ₹20 lakhs.

   • For goods-only suppliers: The limit is ₹40 lakhs in most states.

3. Failure to Register: Despite clear thresholds, many small vendors are unaware of their obligations under GST, leading to non-compliance.

What Are the Consequences of Non-Compliance?

Failing to register for GST after crossing the turnover limit can lead to serious consequences, including:

• Penalties: A fine of 10% of the tax due or ₹10,000, whichever is higher.

• Interest on Tax Due: Interest may be levied on unpaid taxes.

• Legal Actions: Continuous non-compliance can result in further legal actions.

Lessons for Small Business Owners

1. Monitor Your Turnover:

   • Keep a close eye on your total sales, including cash and digital transactions.

   • Aggregate turnover includes income from all branches under the same PAN.

2. Understand GST Registration Thresholds:

   • If your turnover exceeds ₹20 lakhs (for services) or ₹40 lakhs (for goods-only suppliers), GST registration is mandatory.

3. Maintain Proper Records:

   • Digital payments are easy to track. Ensure all transactions are accounted for in your records.

   • Use accounting software or hire professionals to streamline your finances.

4. Voluntary Registration:

   • If you’re approaching the threshold, consider voluntary GST registration. It not only ensures compliance but also enhances your business’s credibility.

5. Seek Professional Guidance:

   • Engage with tax consultants or accountants to ensure compliance with GST laws.

How to Avoid Such Notices

• Register Promptly: Once your turnover crosses the threshold, register under GST without delay.

• File Returns Regularly: After registration, ensure timely filing of GST returns to avoid penalties.

• Be Aware of Exemptions: Certain categories of goods and services are exempt from GST. Understand whether your business qualifies for such exemptions.

• Stay Updated: GST laws and thresholds may change. Regularly check for updates or consult a professional.

Final Word

The case of the panipuri vendor serves as a crucial reminder for all small business owners and vendors to be aware of their tax obligations. While digital transactions have made payments seamless, they also make it easier for tax authorities to monitor business activities. Ignorance of the law is no excuse, and non-compliance can lead to financial and legal troubles.

Take proactive steps to ensure GST compliance, stay informed, and safeguard your business against avoidable penalties. Remember, compliance is not just a legal obligation but also a step toward building trust and credibility in your business.