Exports excluded from new tax credit rules, clarifies finance ministry

The clarification comes after experts identified that the requirement of paying 1% of the overall tax outgo in money by businesses with ₹5 million sales a month might result in cashflow associated difficulties for some. Additionally, traders have registered their protest on the new rule that is effective from 1 January.

Moreover export turnover, sale proceeds of things that are exempt from Items and Services Tax (GST) is to be excluded whereas computing the ₹five million sales threshold for 1% cash tax payment, stated the official.

The government’s concept is to step up GST compliance and nail fake bill rackets by forcing part of the cost in money. These engaging in trading bogus invoices (selling invoices without actual supply of products) selected items which have limited value addition in order that the there is no need for any money cost of tax and the entire tax liability is met by bogus credit. The 1% tax is meant to address this. As per finance ministry estimates, this rule is expected to use on about 40,000-45,000 tax payers.

“This provision is a very smart rule against fraudsters and would not affect genuine business entities or the ease of doing business in any manner” the official explained. GST authorities had held a nation-wide drive against fake invoices since mid-November. This has so far led to arrest of more than 175 persons including five chartered accountants and more than 1800 cases towards 8,000 entities so far, the official added.

Additionally, from 1 January, the extent of tax credit that could be claimed by businesses where their distributors haven’t uploaded invoices, has been halved to 5% of their eligible tax credit. Businesses with greater than ₹100 crore sales will also have to compulsorily raise electronic invoices (e-invoice) from 1 January. Now, only those with ₹500 crore gross sales want to do that. E-invoicing entails actual time validation of transaction particulars in a portal run be Nationwide Informatics Centre. This provides tax officers entry to information about transactions within the economic system instantaneously and helps stop fraud.

Fakeinput tax credit scoredeclare is the most commonmethod of GST evasion, in accordance with Rajesh Gupta, co-founder and director of Busy Infotech Pvt. Ltd., an accounting software maker. E-way payments and e-invoicing which leverage digital technology are welcome steps to weed out fake invoices, stated Gupta.