Micro, small and medium enterprises (MSMEs) don’t require to pay minimal 1% Items and Providers Tax (GST) liabilities in money as companies with annual turnover of lower than Rs 6 crore are exempted from the brand new rule, a finance ministry official stated.
The Central Board of Oblique Taxes and Customs (CBIC) final week launched a change within the GST guidelines that restricted the usage of enter tax credit score (ITC) for discharging GST legal responsibility to 99%, the official stated requesting anonymity. The transfer was geared toward curbing the misappropriation of ITC by means of faux invoicing, he stated.
“As a way to shield small companies and real taxpayers there are some exemptions to this rule,” he stated. The brand new rule isn’t relevant in such circumstances the place registered entities have already deposited greater than Rs 1 lakh as income-tax in final two years.
It’s also not relevant to registered entities who’ve obtained a refund of greater than Rs 1 lakh within the previous monetary 12 months on account of export, he stated including that authorities departments and native authorities are additionally exempted from the rule.
“A authentic enterprise runs for revenue and a minimal worth addition is predicted from them. It is just the place plenty of faux credit score is used that no tax fee in money is made,” he stated giving the explanation behind implementing the brand new rule.
This rule will assist to regulate faux invoices fraudsters who avail and move on ITC by dummy, faux and dormant entities which present excessive turnovers, however haven’t any monetary credibility and flee after issuing faux invoices and misusing ITC, he added.
The brand new rule is the result of a by means of deliberation by the GST Regulation Committee to examine the menace of pretend invoices and misappropriation of ITC, he stated. The federal government in November launched a nationwide drive to nab such fraudsters. “To this point, 175 individuals have been arrested underneath the continued drive and greater than 1,800 circumstances have been booked towards over 8,000 faux entities,” he stated.