Payment of 1% GST in cash only for 45,000 taxpayers: DoR sources

Based on the recommendations of the GST Law Committee, the government has notified new indirect tax rules that makes cash payment of 1 per cent of GST tax liability mandatory for businesses whose taxable supply value exceeds Rs 50 lakh.

New Delhi: The government’s decision on mandatory payment of at least 1 per cent of GST tax liability in cash will impact only around 40,000 to 45,000 taxpayers, sources in the finance ministry said on Saturday.

Based on the recommendations of the GST Law Committee, the government has notified new indirect tax rules that makes cash payment of 1 per cent of GST tax liability mandatory for businesses whose taxable supply value exceeds Rs 50 lakh. This change will come into effect from January 1, 2021.

Sources in department of revenue said data indicated out of the total GST tax base of 1.2 crore taxpayers only around 4 lakh taxpayers have supply value greater than Rs 50 lakh, and only around 1.5 lakh out of these 4 lakh taxpayers pay less than 1 per cent tax in cash. So, the changes would include only a small section of taxpayers.

Moreover, the DoR sources said with exclusions around 1.05 lakh taxpayers get further excluded from these 4 lakh. Thus, the rule would apply only to about 40,000 to 45,000 taxpayers. This would be around 0.37 per cent of the total GST tax base of 1.2 crore taxpayers.

Under the new rule cash payment of 1 per cent is to be calculated on the tax liability in a month and not turnover of the month. For example, if the turnover of taxable supplies of a taxpayer is Rs 100 in a month and he is required to pay GST of 12 per cent on his output taxable supplies, then he will be required to pay 1 per cent of Rs 12, i.e., Rs 0.12 (12 paisa) only in the month through cash under this rule.

Therefore, the net requirement of cash payment will be only 0.12 per cent of the turnover in such a case, finmin sources said citing another example, if a dealer has made sale of Rs 1 crore of the goods whose tax rate is 12 per cent and if he is discharging his tax liability more than 99 per cent through input tax credit (ITC) then he has to pay only Rs 12,000 under this rule.