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Mandatory 1% GST liability from January 1: Who all will have to pay? Here's your cheat sheet

About 45,000 taxpayers, which equals to only 0.37 percent of the total businesses registered in the Goods and Services Tax System, will be required to fulfill the mandatory requirement of a 1% percent cash system of GST liability with effect from January 1.

India TV Business Desk India TV Business Desk
New Delhi Updated on: December 27, 2020 22:59 IST
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Mandatory 1% GST liability from January 1: Who all will have to pay

About 45,000 taxpayers, which equals to only 0.37 percent of the total businesses registered in the Goods and Services Tax System, will be required to fulfill the mandatory requirement of a 1% percent cash system of GST liability with effect from January 1. This comes after the Central Board of Indirect Taxes and Customs (CBIC) amended GST rules in order to curb tax evasion by way of fake invoicing. But will all the registered persons have to pay 1 percent cash liability? Here's your cheat sheet.

Who will have to pay?

The rule is applicable to only those registered persons whose value of taxable supply, other than exempt supply and export, in a month exceeds Rs 50 lakh - that means those whose annual turnover is more than 6 crore.

The rule is not applicable in the cases where the registered person: 

  1. has deposited more than Rs 1 lakh as income tax in each of the last two years. 
  2. has received a refund of more than Rs 1 lakh in the preceding financial year on account of export or inverted tax structure. 
  3. has paid output tax through cash in excess of 1% of the total output tax liability, applied cumulatively, upto the month in the current financial year. 
  4. is a government department, PSU, local authority, statutory body.

READ MORE: Mandatory 1% cash payment of GST liability from January 1, applicable to 45000 taxpayers

Will the rule affect genuine taxpayers?

The rule is only applicable to taxpayers who have taxable supplies of more than Rs 50 lakh in a month, which amounts to an annual turnover of more than Rs 6 crore. Besides, the registered persons falling in any of the exempted category including paying Rs 1 lakh as Income Tax in each of the last two financial year or having received refund of more than Rs 1 lakh in the previous year on account of export or inverted duty structure, etc. are also out of purview of this rule. With these exemptions and conditions and precise targeting, the requirement of mandatory payment of at least 1% of the tax liability in cash would apply only to risky or suspicious taxpayers and genuine taxpayers would remain excluded.

Will it affect small businesses

According to the CBIC, the cash payment of 1% is to be calculated on the tax liability in a month and not turnover of the month. Infact, it amounts to only 0.01% of turnover. For example, if a dealer has made a sale of Rs 1 crore of the goods whose tax rate is 12% and if he is discharging his tax liability more than 99% though ITC, then he has to pay only Rs 12,000 under this rule. On the other hand, a composition dealer would have paid Rs 1 lakh in cash with this volume of sale. 

READ MORE: GST taxpayers to get flexibility to decide on monthly tax payment

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