MSMEs exempted from New GST rule

Businesses with an annual turnover of less than Rs 6 crore are exempted from the new GST rule. The Central Board of Indirect Taxes and Customs (CBIC), last week, introduced a change in the GST rules that restricted the use of input tax credit (ITC) for discharging GST liability to 99 per cent.

An official said the new rule has been brought about to curb the misappropriation of the ITC through fake invoicing. It will help control fake invoices fraudsters who avail and pass on ITC by dummy, fake and dormant entities which show high turnovers, but have no financial credibility and flee after issuing fake invoices and misusing ITC.

The Centre has also said the cash payment of one per cent will be calculated on the tax liability in a month, and the turnover of the respective month, and that will not lead to financial burden on businesses. The CBIC introduced Rule 86B in GST rules, to be applicable from January 1. On December 24, it notified certain changes to the rules, asking businesses with a monthly turnover of over Rs 50 lakh to mandatorily pay at least one per cent of their GST liability in cash. In November, the government had launched a nationwide drive to nab fraudsters – 175 people have been arrested, and more than 1,800 cases have been booked against over 8,000 fake entities.

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“In order to protect small businesses and genuine taxpayers, there are some exemptions to this rule. The new rule is not applicable in such cases where registered entities have already deposited more than Rs 1 lakh as income-tax in last two years,” the official explained. “It is also not applicable to registered entities which have received a refund of more than Rs 1 lakh in the preceding financial year on account of export.”

Government departments and local authorities are also exempted from the new rule.