What is the ‘One per cent Cash Payment Norm in GST’?

Recently, the Central Board of Indirect Taxes and Customs (CBIC) has amended the GST rules with an aim to restrict tax evasion by way of fake invoicing. As per the new amendment, it is now mandatory for businesses with a monthly turnover of more than Rs 50 lakh to pay at least 1% of their GST liability in cash.

Key Points

  • The Revenue Department has made some clarifications related to the new amendment.
  • As per the department, this mandatory payment of 1% of GST liability in cash would be applicable to around 45,000 taxpayers only.
  • This number amounts to only 0.37% of the total businesses registered in the Goods and Services Tax (GST) system.
  • The new amendment will restrict the use of input tax credit (ITC) for the payment of GST liability to 99 percent.
  • The restriction is not applicable to businesses where the managing director or any partner has paid over Rs 1 lakh as income tax or the registered person has received a refund amount of over Rs 1 lakh in the previous fiscal year for the unutilized input tax credit.
  • As per the data analysis, out of the total 1.2 crore GST taxpayers, only about 4 lakh taxpayers have a monthly turnover of more than Rs 50 lakh.
  • Of these 4 lakh taxpayers, only around 1.5 lakh taxpayers pay less than 1% of their GST liability in cash.
  • After this, when other exclusions of the rule are considered, then additional 1.05 lakh taxpayers get excluded from these 1.5 lakh taxpayers.
  • Thus, the rule would apply only to approximately 40,000 to 45,000 taxpayers.

This mandatory cash payment of 1% GST liability will come into effect from January 1, 2021.