Author: Amrut Chitragar
Published on: July 19, 2025
Last Updated: July 19, 2025
Disclaimer: This article is for educational awareness only. This is purely the author's personal view and does not constitute any legal or official advice. All views are based on public news reports, GST rules, and common-sense observations. Please consult a tax professional before taking any action.
GST Department has issued a formal press note on 11-07-2025 clarifying UPI-based turnover, ₹40L limit, and GST registration rules.
👉 📄 Click here to view/download Press Note PDF
🎬 Kannada Video is available in the next section.
👀 Real tips, examples, and practical knowledge you won’t find anywhere else.
👉 Read the article fully!
Bakery owners and small traders in Bengaluru are receiving GST notices for crossing the ₹40 lakh UPI turnover limit. But why didn’t the system alert them when they crossed the threshold? This article questions that gap, explains what the GST law says, and suggests how simple tech and real-time alerts could save honest taxpayers from penalties.
- Why Bengaluru Bakery Owners Got GST Notices
- Understanding the ₹40 Lakh Turnover Limit
- Why Do GST Notices Come So Late?
- How Tech + Bank Alerts Can Help
- Composition Scheme Rules
- What If You’re Unregistered?
- It’s Also Our Duty as Citizens
- Red Zone Alert: Above ₹1.5 Crore?
- Big Question: Bread or Fried? Who Will Decide?
- Most Searched Questions – Answered
- Suggestions from Amrut to Small Businesses
📺 Why This Article Was Written
When I saw TV interviews and news reports about bakery owners in Bengaluru receiving GST notices for crossing the ₹40 lakh UPI limit, one question hit me hard — why didn't anyone warn them earlier? These are not tax evaders; they are small business owners who adopted digital payments like PhonePe and GPay — which the government itself encouraged.
Suddenly, they’re being asked to respond to GST notices, pay penalties, and defend their past sales — without ever knowing they crossed the threshold. As a citizen and finance educator, I had to raise some serious concerns and offer practical solutions that could help both the government and honest traders.
📊 Understanding the ₹40 Lakh Turnover Limit
As per the GST Act (Section 22), any business with aggregate turnover above ₹40 lakh in a financial year (₹20 lakh in special category states) must register under GST, unless the supplies are fully exempt. This turnover includes cash + UPI + bank transfers – not just taxable sales.
Most small traders are unaware that even non-GST items like bread or offline snacks contribute to this limit. They accept UPI payments daily, but there’s no automatic system that alerts them when ₹35 or ₹40 lakh is reached.
🚨 So Why Do Notices Come So Late?
GST departments match UPI payment data (via AIS, bank reports, GSTR-1 data) only after the year ends or when it becomes suspiciously high. Since there's no real-time alert system like in income tax (e.g., Form 26AS), a trader may unknowingly cross ₹40 lakh — and only know when a notice arrives!
💡 Why Tech + Bank Alerts Can Prevent GST Trouble
We live in a digital India. The same UPI and banking systems that track real-time payments can also help small business owners. If income tax departments can trigger AIS entries, why can't GSTN send alerts the moment a ₹35 lakh turnover is approached?
- 📱 SMS or Email Alerts: Just like credit card limits, a small dealer can be notified when ₹35L, ₹38L, or ₹40L is crossed.
- 🏦 Bank Letter Alerts: Since banks already do KYC and issue UPI IDs, they can auto-send letters or email alerts if UPI receipts cross GST thresholds.
- 📬 India Post Notices: Official GST notices should be sent via registered post, not just email/SMS — especially since email IDs and mobile numbers may be outdated.
- 📊 AIS Dashboard Warning: Just like income tax Form 26AS/AIS flags high-value transactions, GST-related AIS entries could alert a user when cumulative UPI sales cross ₹35 lakh.
If the government wants people to go digital, people must also be digitally informed. Relying only on SMS or back-dated notices defeats the trust in UPI systems.
🧾 Composition Scheme Rules – And What If You're Unregistered?
📌 Who Can Opt for Composition?
Under Section 10 of the GST Act, a small dealer can opt for the Composition Scheme if:
- Aggregate turnover is under ₹1.5 crore (₹75 lakh in special category states)
- They sell only within their own state (intra-state)
- They do NOT supply services (except small restaurant or service turnover under 10%)
- They are NOT engaged in interstate sales or e-commerce
If your turnover crossed ₹40 lakh but remained under ₹1.5 crore, you may still be eligible for composition. The department may ask for tax dues from the date your turnover crossed the threshold.
🚫 What If You're Unregistered?
If you're not registered but received a GST notice due to UPI data:
- 👉 Consult a qualified CA or GST practitioner immediately
- 👉 Prepare item-wise sales data and payment proofs
- 👉 If your items are exempt (like fresh bread, milk, etc.), document it properly
- 👉 Consider applying for GST registration or composition to regularize your status
Many small dealers don’t know GST limits or classification. But ignorance doesn’t stop a notice. So taking quick, documented action is the only way to avoid penalties.
🇮🇳 It’s Also Our Duty as Citizens
Yes, the system needs improvement — but as responsible citizens, we must also maintain some basic financial hygiene. Earning money is important, but keeping a record of it and supporting the nation’s tax system is equally essential.
This is not a new concept. Even in earlier Sales Tax and VAT regimes, small shopkeepers maintained notebooks or registers. Today, we can easily maintain:
- 🗒️ Simple Excel files or Tally records of daily sales
- 💳 Monthly UPI/BANK transaction summaries
- 📄 Bills for large or bulk orders
- 👨💼 Annual health check-up with a good Chartered Accountant
Let us stop waiting for a notice. Let us act smart from day one — because financial literacy is the real freedom.
🚨 Red Zone Alert: What If You’ve Crossed ₹1.5 Crore?
If your UPI or total turnover has crossed ₹1.5 crore and you are still not registered under GST, you are in the **critical red zone**. You are no longer eligible for the Composition Scheme, and continuing business without registration could lead to:
- 🔴 Penalty under Section 122 of the GST Act for non-registration
- 🔴 Demand for full GST along with interest for all past months
- 🔴 Risk of assessment under Section 63 (Best Judgment)
- 🔴 Bank account attachment if no response is given on time
If you are in this category, do not delay. Contact a tax consultant or CA and start regularizing your GST compliance immediately. Respond to notices with documentation, payment plan, and professional help.
🤔 The Big Question: Bread or Fried? Who Will Decide?
Let’s say a small bakery in Bengaluru crossed ₹40 lakh in UPI receipts. But their business includes both:
- 🍞 Selling fresh bread and buns – which are GST exempt
- 🍟 Selling fried snacks like chips or kurkure – which are taxable
So here’s the question — how will the GST department separate exempt vs taxable sales?
- Will they ask for stock registers, daily sale sheets, or bills?
- Will they compare UPI amounts with raw material purchases?
- Can they use supplier invoices or packaging data to estimate?
These are not just legal issues — they are practical ones. And that’s why both sides need clarity. Small traders need education, and the department needs systems that work even where computer billing isn't used.
Let’s see how this challenge is handled — and what kind of documentation becomes the new normal.
🔍 Most Searched on Google – Answered Here
1️⃣ Why are bakery owners in Bengaluru receiving GST notices?
Because their UPI transactions (like PhonePe/GPay) crossed ₹40 lakh, triggering GST liability. Even exempt items can count toward this limit.
2️⃣ Is there an alert system when my sales cross ₹40 lakh?
Currently, there is no auto alert system from GSTN. That’s one of the concerns this article raises — we need tech-driven warnings.
3️⃣ I sell only bread and milk. Do I need to register for GST?
If your products are fully exempt and you can prove it, registration may not be needed. But if total turnover (cash + UPI) exceeds ₹40 lakh, a clarification with records is a must.
4️⃣ What should I do if I received a GST notice but I'm not registered?
Immediately consult a CA or GST expert. Gather sales, purchase, and item-wise data, and respond with documentation. Registration may be required going forward.
5️⃣ Is UPI turnover considered for GST registration limit?
Yes. UPI is just a payment mode. All sales — whether cash, card, or UPI — are included in the turnover calculation under GST.
6️⃣ What if I didn’t receive any GST notice but my UPI is ₹45 lakh?
You should voluntarily consult a tax advisor and regularize your compliance. Waiting for notice increases the risk of penalty.
💼 Suggestions from Amrut to Small Business Owners
With GST notices becoming more frequent and UPI-based tracking increasing, it’s no longer safe to ignore compliance. Here's what I strongly recommend:
- ✅ Appoint a part-time or full-time accountant — even for small businesses
- ✅ Accountants can track your turnover and alert you when it nears limits
- ✅ They know how to maintain sales, stock, and item-wise registers as required by law
- ✅ A good accountant ensures you respond to notices on time — avoiding penalties
- ✅ With GST, TDS, UPI, and IT matching — even a small mistake can freeze your account or lead to audit
Don’t see an accountant as a cost — see it as a shield. In today’s fast-changing tax world, having an expert on your side is no longer optional.
👉 Read this article – Why Hiring a Good Accountant Can Save Lakhs
👉 Subscribe to our YouTube channel – Learn with Amrut for weekly GST & finance tips in simple language.
✉️ Have feedback or want to collaborate?
💬 Click here to contact me for consultations, partnerships, or automation support.
Post a Comment