The amended GST rules are targeted at fly-by-night operators engaged in availing input tax credit (ITC) fraudulently through fake invoices, sources in the tax department said, adding it will not impact the cash flow of small businesses. In fact, the new rule about mandatory cash payment to discharge 1% of tax liability applies to only 45,000 GST taxpayers, which is 0.37% of all the registered businesses.
Earlier this week, the government notified that any business that supplies goods or services worth over Rs 50 lakh will have to pay at least 1% of the tax liability in cash instead of discharging their entire liability through the ITC.
Sources in the revenue department said data analysis showed that of 1.2 crore registered taxpayers under GST, only around 4 lakh taxpayers have supply value greater than Rs 50 lakh, and only around 1.5 lakh of these 4 lakh taxpayers pay less than 1% tax in cash.
“This means the rule applies to only about 40,000-45,000 taxpayers. This would be around 0.37% of the total GST tax base of 1.2 crore taxpayers,” sources said.
They further explained that the cash payment of 1% for a supplier making, for example Rs 1 crore taxable supply comes to about Rs 12,000 in a month, an amount that is significant to cause any cash flow problems for dealers of this size, sources said.
“The rules were brought about on the recommendations of the GST Council Law Committee to curb the menace of GST fake invoice, and it is aimed at identifying where the risk to revenue is high so that multi-layered frauds involving invalid ITC can be curbed,” a source said.