Received a GST notice for UPI transactions or data mismatches? Understand common reasons for GST notices in India, including GSTR-1 vs. GSTR-3B discrepancies and UPI turnover scrutiny. Learn how to respond effectively and avoid penalties

In India, under GST (Goods and Services Tax), various types of notices are issued.¹ Currently, one of the most frequently discussed and issued notices relates to discrepancies in data furnished in GST returns, particularly mismatches between GSTR-1 (outward supplies) and GSTR-3B (summary return), and GSTR-3B and GSTR-2A (auto-drafted ITC statement).

Another significant area for recent notices, as highlighted in news reports, involves UPI transactions and alleged GST evasion by small businesses and unregistered vendors whose annual turnover crosses the threshold for GST registration.² This has been particularly prevalent in states like Karnataka.

Common reasons for GST notices include:

• Non-filing or delayed filing of GST returns (GSTR-3A is a common notice for non-filers).³
• Discrepancies in Input Tax Credit (ITC) claims, especially mismatches between GSTR-3B and GSTR-2A.⁴
• Incorrect payment of taxes, including miscalculation, wrong classification of goods/services, or underpayment.⁵
• Non-registration under GST when required by law.
• Non-compliance with e-way bill requirements.
• High-value transactions that trigger scrutiny.⁶
• Issues related to the eligibility of composition dealers (CMP-05).

Regarding the quantity of notices:

It’s challenging to provide an exact real-time number as the situation is dynamic. However, based on recent reports:

• In December 2023, GST authorities reportedly sent demand notices totaling ₹1.45 lakh crore to about 1,500 businesses primarily due to discrepancies in annual returns and ITC claims for the financial year 2017-18. This surge was partly due to the deadline for serving notices for that financial year.
• The Directorate General of GST Intelligence issued over 20,000 notices pan-India for assessment year 2017-18 to 2021-22, involving a tax demand of over ₹80,000 crore.⁷
• A report from September 2024 indicated that GST officials issued a little under 1.13 lakh show-cause notices to taxpayers in 2023-24, with a majority pertaining to “data discrepancies.”⁸
• There have been widespread reports of thousands of small businesses and street vendors receiving GST notices, especially in states like Karnataka, based on their UPI transaction data suggesting turnover exceeding the GST registration threshold.⁹

It’s evident that GST authorities are actively scrutinizing returns and transactions, and a significant number of notices are being issued, particularly concerning data mismatches and cases where businesses might be operating above the registration threshold without GST compliance.¹⁰

Avinash Bhatt
Email: Bhattavi93@gmail.com