NEW DELHI: The mandatory 1% Goods and Services Tax (GST) cash payment requirement as of January 1 would apply to around 45,000 taxpayers, which is only 0.37% of the total of businesses registered in the GST system, revenue department sources said on Saturday.
To combat tax evasion through false invoicing, the Central Council for Indirect Taxes and Customs (CBIC) amended GST rules earlier this week, forcing companies with monthly turnover exceeds Rs 50 lakh to compulsorily pay at least 1% of their GST obligation in cash.
The new rule limits the use of the input tax credit (ITC) for paying the GST at 99% effective January 1, 2021.
However, this restriction will not apply in cases where the Managing Director or any partner has paid more than Rs 1 lakh as income tax or the registered person has received a refund amount of more than Rs 1 lakh during the previous fiscal year as an input tax credit.
Sources said analysis of the data indicates that out of total taxpayer 1.2 crore GST taxpayer basis, only around 4 lakh taxpayers have a monthly procurement value above Rs 50 lakh. Of these 4 lakhs, only around 1.5 lakh of taxpayers pay less than 1% of their GST obligation in cash.
“Now, when the rule’s exclusions are applied, around 1.05 lakh of taxpayers are more excluded from those 1.5 lakh of taxpayers. So the rule would only apply to about 40,000 to 45,000 taxpayers. This would represent about 0.37% of the total. Taxpayer 1.2 crore GST tax base, ”sources said.
Sources said the rules have been changed to reduce the threat of fake GST invoice frauds and sneaky bogus businesses / operators who profit and transfer input tax credit (ITC) wrongly.
CBIC has registered around 12,000 cases of ITC fraud and arrested 365 people in such cases so far. In the past six weeks alone, more than 165 fraudsters have been arrested.