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SBI Research Cautions: Aggressive GST Scrutiny May Drive Small Firms Back to Cash Economy
22 Jul
Summary
- SBI Research says aggressive GST enforcement based on UPI transactions may push small businesses back to informal cash-based economy
- GST implementation has helped reduce market distortions and soothe inflation
- One-fifth of GST registrants have at least one female member, reflecting women's empowerment
According to a recent report by SBI Research, the Goods and Services Tax (GST) enforcement in India should be balanced with sensitivity, as aggressive scrutiny based on digital transactions like UPI may push small businesses back into the informal cash-based economy.
The report highlights that while the GST regime has laid the foundation for greater accountability and revenue generation, its long-term success will depend on ensuring empowerment of small traders, rather than penalizing them. The report cites a recent case from Karnataka, where numerous small traders and shopkeepers in Bengaluru received disproportionately high tax notices primarily based on their digital footprints.
However, the report also notes that the GST implementation has had a soothing impact on inflation by removing market distortions through the input tax credit mechanism. Additionally, the data shows encouraging trends in women's participation, with one-fifth of registered GST taxpayers having at least one female member.
The SBI Research report emphasizes that inclusivity, transparency, and fair implementation will be key to celebrating the GST in both letter and spirit, as the indirect tax regime completes its 8th year since rollout.
