Rule of 1% GST liability payable in cash may impact 45,000 units

Input tax credit may be used for up to 99% of GST due; rule meant to check fraud

The mandatory requirement of 1% cash payment of GST liability effective January 1 would be applicable to about 45,000 taxpayers, Revenue Department sources said on Saturday. This comes to only 0.37% of the total businesses registered in the Goods and Services Tax system, they added.

To curb tax evasion by way of fake invoicing, the Central Board of Indirect Taxes and Customs (CBIC) had recently made it mandatory for businesses with monthly turnover of more than ₹50 lakh to pay at least 1% of their GST liability in cash. The new rule restricts use of input tax credit (ITC) for discharging GST liability to 99% effective January 1, 2021.

However, this restriction will not apply in cases where the managing director or any partner has paid more than ₹1 lakh as income tax or the registered person has received a refund amount of more than ₹1 lakh in the preceding financial year on account of unutilised input tax credit. Sources said data analysis showed that of the total GST taxpayer base of 1.2 crore, only about 4 lakh have monthly supply value greater than ₹50 lakh. Of these, only about 1.5 lakh pay less than 1% of their GST liability in cash. “When exclusions in the rule are applied, around 1.05 lakh taxpayers get further excluded from these 1.5 lakh taxpayers. Thus, the rule would apply only to 40,000 to 45,000 taxpayers,” sources said.

The CBIC has booked about 12,000 cases of ITC fraud and arrested 365 persons in such cases so far. In the last 6 weeks alone, more than 165 fraudsters have been arrested.

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