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.

 

DISCLAIMER: The views expressed are as per Tally Help. The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.