India’s Unified Payments Interface (UPI) provides a near-universal, machine-readable trail of retail transactions. The UPI-Tax Hub proposed here is a government-sanctioned middleware that ingests certified UPI event streams, auto-tags sales and supplier payments, issues compressed e-invoices, and generates pre-filled GST and income-tax summaries for eligible MSMEs. By converting everyday payments into compliance-ready records, the Hub reduces time and cognitive burdens, strengthens the tax base, and enables lenders to underwrite working capital on the basis of verifiable histories.
A 12-month, multi-site pilot (50k–100k merchants) with financial and non-financial incentives can test technical integration, ITC mechanics, and behavioural uptake. Implementation requires legal authority for certified intermediaries to submit compact e-invoices and pre-filled returns, NPCI/RBI operational guidance, and privacy safeguards (data minimization, explicit consent, independent ombud). Conservative modelling shows meaningful, pilot-driven revenue gains and reduced enforcement costs. With careful sequencing and robust governance, the UPI-Tax Hub can formalize commerce at scale and serve as a replicable model for comparable economies in the Global South.