GST CASH PAYMENT 1 PERCENT

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This discussion clarifies whether the 1% GST cash payment rule (Rule 86B) applies to businesses. The rule mandates a 1% cash payment of output tax liability for businesses with taxable supplies over Rs 50 lakh. However, there are key exceptions. Businesses are exempt if they have paid over INR 1 lakh in income tax annually, or if they have claimed refunds exceeding INR 1 lakh for exports or inverted duty structures in the previous financial year. Other exemptions include specific roles like directors, proprietors, and certain entities like PSUs and government departments.

S. RAVICHANDRAN

S. RAVICHANDRAN (Querist)
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26 November 2023 My client received SCN for 1% cash payment for discharge of output tax liability. But they paid income tax around 7 lacs for the past three years and also claiming Refunds both Exports and Inverted duty structure. As per the rule 86B, the cash payment 1% applicable or not applicable.

Please clarify

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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27 November 2023 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.

S. RAVICHANDRAN

S. RAVICHANDRAN (Querist)
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27 November 2023 If Income Tax paid more than one lac, refund claimed on exports and inverted duty structure, In these circumstances also the section 86B applicable sir.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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27 November 2023 Exceptions to the Rule 86B:

Any person mentioned in the list below, who has paid an annual income tax greater than INR one lakhs rupees under the IT Act of 1961 is exempted from this rule –
A registered person
Karta of HUF
Managing director of the business of the registered person
Whole-time directors or any partners (in the case of the firm)
Proprietor
If a registered person has received a refund of INR one lakh or more in the last financial year, this refund of unused ITC received towards export under the letter of undertaking or because of an inverted tax structure, will not be accounted for under Rule 86B.
When a registered person in question has paid his OTL using the electronic cash ledger of an amount that is more than 1 percent collectively of the entire OTL on the person in the given month in a given financial year.
The person is exempted from any tax if they hold any of the following offices –
Local authority
PSU
Statutory authority
Government department

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