1. Introduction

The growth of automated compliance in the GST architecture has enabled authorities to detect anomalies at scale — but it has also led to a surge in compliance notices. Small and medium enterprises (SMEs) and micro‑businesses, which typically lack sophisticated accounting functions, have been disproportionately affected. This paper analyses the causes of excessive notices, quantifies their impact on business operations and cash flow, and argues why a considered enhancement of turnover limits (for registration, composition, e‑invoicing and audit) could reduce unnecessary regulatory burden while preserving revenue integrity.

2. Why Notices Have Multiplied

Automation and real‑time reconciliation between GSTR‑1, GSTR‑3B, e‑invoices and AIS/TIS feeds generate mismatch alerts that translate into automated notices. While these systems are effective in identifying genuine fraud, they also capture minor timing differences, portal errors, or bookkeeping mistakes. Furthermore, broad application of e‑invoicing, TDS/TCS reporting and frequent rule changes increase the chances of technical mismatches, triggering notices even where no substantive tax liability exists.

3. Economic and Operational Impact

Responding to notices consumes executive time and resources. For MSMEs, this often means diverting staff from production to compliance, engaging costly tax advisors, and facing interrupted cash flows due to ITC blocking or provisional recoveries. The aggregate economic cost—measured in professional fees, delayed payments, and operational disruption—can be significant and disproportionate to the potential revenue at stake.

4. The Case for Enhancing Turnover Limits

Raising turnover thresholds is argued on several grounds: supporting ease of doing business, reducing administrative costs for small firms, and allowing tax authorities to concentrate enforcement on larger taxpayers where revenue risks are higher. Specific proposals include increasing registration limits, raising the e‑invoicing threshold, expanding composition scheme ceilings and rethinking audit thresholds. Incremental upward revisions help balance compliance demands against the state's fiscal interest.

5. Suggested Threshold Recalibrations

• Registration threshold: Consider raising the goods/services registration thresholds to better reflect inflation and business scale.
• Composition scheme: Evaluate increasing the ceiling to ₹2.5–3.0 crore for composition eligibility to widen simplified compliance coverage.
• E‑invoicing: Reassess the mandatory e‑invoicing limit with an eye on digital readiness; consider higher thresholds or phased rollouts for sectors with low automation levels.
• Audit & reconciliation: Raise the threshold for mandatory annual reconciliation or provide simplified reconciliation modalities for smaller turnovers.

6. Counterarguments & Risk Mitigation

Opponents argue higher thresholds could shrink the taxable base or incentivise fragmentation. To mitigate these risks, the policy could combine threshold increases with anti‑avoidance measures: robust PAN‑level aggregation rules, anti‑splitting provisions, and continued targeted surveillance using revenue risk models. Gradual implementation with periodic reviews reduces sudden revenue impact while providing breathing space for compliance improvements.

7. Alternative Reforms to Reduce Notice Burden

Beyond thresholds, reforms can rationalise notice issuance: implement pre‑notice filters to eliminate trivial mismatches, provide resolver windows for auto‑fixable discrepancies, introduce a tiered notice system (informational alerts vs. demand notices), and strengthen taxpayer helpdesks for faster resolutions. Such measures preserve enforcement focus while reducing nuisance correspondence.

8. Operational Recommendations for Tax Authorities

• Adopt a risk‑calibrated notice engine that weighs monetary impact and recurrence before issuing a demand.
• Introduce a ‘soft notice’ step: an informational alert with a short cure period before escalating to formal show‑cause notices.
• Enhance taxpayer education and digital assistance, especially for MSMEs, to reduce inadvertent errors.
• Monitor the real‑world impact of threshold changes through pilot programs and stakeholder feedback.

9. Recommendations for Businesses

Businesses should strengthen internal controls, adopt basic accounting software, perform monthly reconciliations between GST returns and books, and appoint a compliance owner. Micro‑enterprises should explore simplified accounting solutions or pooled compliance services to lower costs while maintaining accuracy.

10. Conclusion

A balanced approach is essential: enhancing turnover thresholds where justified, but pairing such changes with safeguards against revenue erosion and abuse. Rationalising notices, improving taxpayer support, and calibrating thresholds can significantly ease compliance pressures for small businesses while enabling authorities to pursue substantive tax risks effectively. The ultimate objective should be a GST administration that is data‑driven yet proportionate, efficient but empathetic to the realities of micro and small enterprises.