The new rule requiring companies to pay no less than 1 per cent of their GST legal responsibility in money is not going to influence small companies and sellers as solely entities with annual turnover of Rs 6 crore and above are required to observe this rule, sources within the Finance Ministry stated.
After unearthing rampant use of faux invoices to evade items and providers tax (GST), the Central Board of Indirect Taxes and Customs (CBIC) had final week amended guidelines to make it obligatory for companies with month-to-month turnover of over Rs 50 lakh to pay no less than 1 per cent of their GST legal responsibility in money.
This new rule applies solely to about 45,000 taxpayers of the GST taxpayer base of 1.2 crore and real sellers and companies wouldn’t be impacted, sources stated, including that it has been dropped at examine use of faux invoices to assert 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. It would apply solely to dangerous or suspicious sellers who use lots of faux credit score and make no money tax cost, they stated.
Dummy corporations which generate faux ITC or are was once a layer in multi-layer faux credit score circulation pay no tax in money.
“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,” an official stated, including that each one small companies, together with MSMEs (micro, small and medium enterprises) and composition sellers, have been excluded from the rule.
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, sources stated.
The rule shouldn’t be relevant in instances 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 acquired a refund of greater than Rs 1 lakh within the previous monetary yr on account of export or inverted tax construction.
The rule can be not relevant to authorities departments, public sector undertakings and native authorities.
The CBIC has booked about 12,000 instances of ITC fraud and arrested 365 individuals in such instances to date. More than 165 fraudsters have been arrested in final six weeks.
