‘Only suspicious or risky traders and operators who fly at night will be affected’
The government has defended its new rule under the Goods and Services Tax (GST) regime, which requires the cash payment of at least 1% of tax obligations for companies with a turnover of more than ₹ 50 lakh per month. instead of using your input tax credits to discharge all of your taxes.
The rule, introduced last Wednesday, has drawn criticism from various public accountants and taxpayers on social media, fueling fears that the mandatory cash payment will negatively affect small businesses, increase their working capital requirements, and make GST a more complex indirect tax system.
However, sources in the Department of Revenue said these fears are misplaced and that “only suspicious or risky distributors and operators” will be affected by the measure aimed at curbing fraud on false GST invoices. Several entities with a turnover of ₹ 6 crore a year (or ₹ 50 lakh a month) would be excluded from the scope of the rule, they noted, and the actual number of entities affected may be as small as 45,000 out of GST’s 1.2. crore registered entities.
“If a registrant deposited more than ₹ 1 lakh rupees as income tax in each of the last two years, or received a refund of more than ₹ 1 lakh in the previous financial year due to export or tax structure inverted, they will be exempted from the rule, ”said an official.
Analysis of official data suggests that only 4 lakh of taxpayers contribute more than ₹ 50 lakh per month, while only about 1.5 lakh of them pay less than 1% tax in cash, the source said. This will drop further to around 40,000 to 45,000 taxpayers after exemptions are taken into account, he explained.
“We have arrived at this rule after detailed deliberations in the GST Council Law Committee to identify and monitor only scammers involved in false invoices and input tax credits. Our nationwide campaign against such fraud has led to 175 arrests and more than 1,800 registered cases against 8,000 bogus entities since the second week of November, ”the official said.
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