Facts about 1% payment of tax liability in cash in GST under Rule 86B

• December 30, 2020
• CA Chandan Agarwal's Office

Misconceptions VS Reality

Facts about 1% payment of tax liability in cash in GST under Rule 86B

Misconception 01: Large number of taxpayers would be affected by the rule.

Reality:

The rule provides for various exemptions like exporters, suppliers of goods of inverted duty structure, taxpayers having a footprint in the Income Tax data base etc. It is expected that this rule would be applicable to less than 0.5% of total taxpayer base of 1.2 crore. The rule clearly identifies where the risk to revenue is high and imposes deterrence to the fraudsters in a multi-layered fraud of passing fake ITC. This rule would help to control such fraudsters, who issue fake invoices and show high turnovers, but have no financial credibility and flee after misusing ITC without payment of any tax liability in cash.

Misconception 02:

The requirement of cash payment of 1% liability will create huge burden on small businesses and will increase their working capital requirement.

Read more on: https://taxguru.in/goods-and-service-tax/misconceptions-reality-facts-1-percent-payment-tax-liability-cash-gst-rule-86b.html