A recent report highlighted that the Gujarat State GST department has intensified its focus on business-to-consumer (B2C) sectors, aiming to close tax compliance gaps. Industries such as ice-cream parlours, salons, coaching classes, and mobile phone dealers are under the scanner for potential tax evasion and non-compliance.
Recent raids across Gujarat exposed tax evasion worth Rs 20 crore, reported The Times of India. Officials revealed that while many registered traders underreport income, a large number of unregistered businesses exceed the GST registration threshold without complying.
This raises an important question: can unregistered small businesses receive GST notices?
Under the Central Goods and Services Tax (CGST) Act, 2017, GST authorities are empowered to scrutinise, audit, and assess businesses regardless of their registration status. Supreme Kothari, Partner at Economic Laws Practice, states: “GST laws allow authorities to issue notices to unregistered businesses whose turnover exceeds the prescribed threshold. Sections 65 and 67 enable audits, inspections, and searches.”
The annual turnover threshold for GST registration is Rs 40 lakh for businesses supplying goods and Rs 20 lakh for service providers. Businesses below these limits are exempt, but exceeding them triggers registration and compliance requirements.
The department employs several methods to monitor unregistered dealers, including analyzing e-way bills, tracking transactions in personal accounts, and identifying income discrepancies. SR Patnaik, Partner at Cyril Amarchand Mangaldas, explains: “While issuing notices to small businesses is legally valid, enforcement may depend on socio-economic and political factors.”
GST compliance can be challenging for small businesses that lack organized operations. Record-keeping, filing returns, and hiring professionals can be resource-intensive. However, registered businesses gain access to input tax credits, reducing overall costs over time.
Umesh Goel, Partner at Ved Jain & Associates, suggests: “Small businesses can leverage schemes like the composition scheme, which simplifies compliance processes.”
Experts recommend that small businesses monitor their turnover, maintain accurate records, and register promptly once thresholds are crossed. Proactive compliance is essential, as the GST department can cross-reference bank transactions and other data sources to detect non-compliance.
As the tax net expands, awareness and adherence to GST regulations are critical for small businesses. With proper guidance and compliance, businesses can benefit from a structured tax framework while avoiding penalties and scrutiny.
