Karnataka Taxpayers Urge GST Relief: Call to Raise Threshold and Stop Unjust Digital Notices

The Karnataka Taxpayers Association (KTPA), a registered non-governmental organisation that represents taxpayers in Karnataka, has recently released a Public Press Note dated July 14, 2025. The note is addressed to the Hon’ble Finance Minister of India, who also chairs the GST Council. The note is regarding an urgent appeal to review and revise some GST-related issues that are currently causing trouble to small taxpayers. The association highlights that small business owners and professionals are receiving numerous GST notices.

The reason behind sending these notices is that the department is using data from online platforms such as PhonePe, Paytm, Google Pay, etc., to track transactions. Many among these taxpayers are not even registered under GST; however, they are still receiving notices on the basis of their payments done online.

The note depicts a clear picture of rising inflation and costs that have affected small traders since the GST was launched in July 2017:

1. Food and Beverages Inflation: Prices have increased by approximately 38% from 2017-18 to 2024-25. This means that everyday goods and services have become much more expensive to afford.

2. Food and Beverages: Prices of rice, pulses, vegetables, and edible oils have increased by 40% to 50%.

3. Construction Materials: Items such as steel, cement, and electrical products have increased by 50% to 70%. This is due to costlier raw materials and transport.

4. Transport Costs: Fuel and logistics expenses have increased by 45% to 60%, which directly affects small traders who depend on the delivery and movement of goods.

5. Packaging Costs: Due to supply issues and import taxes, prices for packaging items like plastic and cardboard have jumped up to 55%.

6. General Operating Costs: Rent, electricity, staff wages, and even digital service costs have increased by 30% to 40%, reducing the profit margin of small businesses to just 6%–8%.

The key issue is that GST registration limits have not been revised for five years. For traders, GST registration is compulsory if annual turnover exceeds Rs. 40 lakhs and for professionals (such as consultants), the limit is Rs. 20 lakhs.

However, due to inflation and rising business costs, these limits are too low now. Numerous small businesses are being forced to be GST registered, even though their profit values are way too small.

There is also a big mismatch between the turnover limits set by the GST Act and the Income Tax Act. This difference causes confusion and creates unnecessary compliance problems for small taxpayers, especially for those who are active online but earn very little profit.

The Karnataka Taxpayers Association is respectfully requesting the Finance Minister of India and the GST Council for the following amendments:

1. KTP Association is requesting to increase the GST registration limits. For traders, increase the limit from Rs. 40 lakhs to Rs. 75 lakhs. For professionals, increase it from Rs. 20 lakhs to Rs. 50 lakhs. This will match current inflation levels and bring GST in accordance with the Income Tax rules.

2. KTP Association is requesting the finance minister to introduce a one-time amnesty scheme. Numerous small business owners who got GST notices based on digital transactions may not have known they needed to register. Let these people regularise their GST by paying just 1% of their turnover as tax, without penalty or interest. After this, allow them to start fresh, and increase the future limit to Rs. 1 Crore so that this issue doesn’t repeat.

3. The KTP Association is requesting not to penalise taxpayers based on their digital transactions entirely. Many online payments might be for personal reasons, reimbursements, or non-business transfers. Just because someone receives money through Google Pay or Paytm doesn’t mean it is business income. Please do not send GST notices merely on digital transaction data.