Notification No. 94/2020 dtd 22nd Dec. 2020

Applicability date: 1st January, 2021

Purpose of Rule: To avoid fake invoicing and eventually curb tax evasion.

Applicability: Registered persons having taxable supply (other than exempt supply and zero-rated supply) in a month more than Rs 50 Lakh i.e.annual turnover of more than Rs 6 crore.

The rule not applicable where the registered person

a)           has deposited more than Rs 1 lakh rupees as Income Tax in each of the last two years.

b)          has received a refund of more than Rs 1 lakh in the preceding financial year on account of export or inverted tax structure.

c)           has paid output tax through cash in excess of 1% of the total output tax liability, applied cumulatively, upto the month in the current financial year.

d)          is a government department, PSU, local authority, statutory body.

Frequency of checking limit of Rs 50 Lakh- Every month before filing each return.

Restriction imposed- More than 99% of output tax liability cannot be discharged by using ITC.

How to calculate tax liability of 1%- The cash payment of 1% is to be calculated on the tax liability in a month and not turnover of the month. It amounts to only 0.01% of turnover. For example, if a dealer has made sale of Rs 1 crore of the goods whose tax rate is 12% and if he is discharging his tax liability more than 99% through ITC, then he has to pay only Rs 12,000 under this rule. On the other hand, a composition dealer would have paid Rs 1 lakh in cash with this volume of sale.

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