MSMEs, small dealers not to be affected by mandatory 1 pc cash GST payment rule

New Delhi: Small businesses and dealers will not be impacted by the brand new authorities rule of paying at the very least 1 per cent of GST liability in cash as solely entities with annual turnover of Rs 6 crore and above are required to comply with the brand new rule, Finance Ministry sources mentioned. After unearthing rampant use of faux invoices to evade items and services tax (GST), the Central Board of Indirect Taxes and Customs (CBIC) had final week amended guidelines to make it mandatory for companies with month-to-month turnover of over Rs 50 lakh to pay at the very least 1 per cent of their GST legal responsibility in cash.

Sources mentioned the rule applies solely to about 45,000 taxpayers out of the GST taxpayer base of 1.2 crore and real dealers and companies would not be impacted.

The new rule, they mentioned, has been introduced to examine use of faux invoices to declare credit score for tax paid on non-existent or extremely inflated enter value.

The new rule restricts using enter tax credit score (ITC) for discharging GST legal responsibility to 99 per cent, efficient January 1, 2021.

The sources added that the rule would assist to management use of faux invoices by fraudsters who avail and move on ITC to dummy, faux and dormant entities which present excessive turnovers, however haven’t any monetary credibility, and flee after issuing faux invoices and misusing ITC.

They mentioned the rule would apply solely to dangerous or suspicious dealers who use loads of faux credit score and make no cash tax payment. Dummy corporations which generate faux ITC or are used to be a layer in multi-layer faux credit score stream pay no tax in cash.

“This provision is a very smart rule against fraudsters and would not affect any genuine business entities or ‘Ease of Doing Business’ in any manner,” the sources mentioned, including that every one small companies, together with MSMEs and composition dealers, have been excluded from the rule.

They emphasised that exceptions and exclusions have additionally been offered primarily based on earnings tax monitor file and refund obtained in final 12 months.

They mentioned that with these exemptions, circumstances and exact concentrating on, the requirement of mandatory payment of at the very least 1 per cent of the tax legal responsibility in cash would apply solely to dangerous or suspicious dealers, and real dealers would stay excluded.

The rule is relevant to registered individuals whose worth of taxable provide, apart from exempt provide and export, in a month exceeds Rs 50 lakh, or Rs 6 crore yearly, they added.

The rule is not relevant in circumstances the place the registered individual deposited greater than Rs 1 lakh as earnings tax in every of the final two years and in addition whereby registered individual has obtained a refund of greater than Rs 1 lakh within the previous monetary 12 months on account of export or inverted tax construction.

The rule is not relevant to authorities departments, PSUs and native authorities.

The CBIC has booked about 12,000 circumstances of ITC fraud and arrested 365 individuals in such circumstances up to now. More than 165 fraudsters have been arrested within the final six weeks alone.