GUWAHATI: Businesses with monthly turnover of over Rs 50 lakh will have to mandatorily pay at least 1 per cent of their GST liability in cash, the finance ministry said as it moved to curb evasion by fake invoicing.
The Central Board of Indirect Taxes and Customs (CBIC) has notified certain changes to the Goods and Services Tax (GST) Rules, bringing in stringent conditions for getting GST registration as well as for businesses to settle tax liability using input tax credit.
The CBIC has introduced Rule 86B in GST Rules, to be applicable from January 1, 2021, which restricts use of input tax credit for discharging GST liability to 99 per cent.
"... The registered person shall not use the amount available in electronic credit ledger to discharge his liability towards output tax in excess of 99 per cent of tax liability, in cases where the value of taxable supply ... in a month exceeds Rs 50 lakh," the CBIC said.
However, this restriction will not apply 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 in the preceding financial year on account of unutilised input tax credit.
Further, the CBIC has amended GST rules restricting filing of outward supply details in GSTR-1 for business that have not paid tax for the past periods by filing GSTR 3B.
"In order to curb the GST fake invoice frauds, the Govt on the recommendations of the GST Council's Law Committee has issued a notification to deal with the menace of fraudsters who avail & pass on ineligible ITC by fake or fly-by-night firms," Finance Minister Nirmala Sitharaman tweeted.
The CBIC said it has booked about 12,000 cases of input tax credit (ITC) fraud and arrested 365 persons in such cases so far. During the last six weeks alone, more than 165 fraudsters have been arrested.
Speaking to G Plus about the impact and flipside of the new rule, Guwahati-based CA Manoj Nahata said, “Now genuine dealers might face working capital crunch due to this move. They will have to pay full GST for purchase and then also pay 1% in cash to the government which will lead the working capital blockage.”
He further added that the move is against seamless credit which was the basic premise set for implementation of GST in India.
“From legal point of view, this new rule will not sustain as it is beyond powers conferred under section 16 of Input Tax Credit,” he informed G Plus.
