Limit on Cash Sale under GST

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Limit on Cash Sale under GST

Don’t get shocked by reading the above heading. Its on the anvil. Before we discuss on this, businessmen need to know that there is already a limit on cash sale under the Income Tax Act – 1961 as under:

 1. Section 269ST

Section 269ST :-  No person shall receive an amount of Rs. 2 Lakh or more:

(a) in aggregate from a person in a day; or

(b) in respect of a single transaction; or

(c) in respect of transactions relating to one event or occasion from a person,

otherwise than by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account:

Provided that the provisions of this section shall not apply to—

(i) any receipt by—

(a) Government;

(b) any banking company, post office savings bank or co-operative bank;

(ii) transactions of the nature referred to in section 269SS;

(iii) such other persons or class of persons or receipts, which the Central Government may, by notification in the Official Gazette, specify.

Explanation.—For the purposes of this section,—

(a) “banking company” shall have the same meaning as assigned to it in clause (i) of the Explanation to section 269SS;

(b) “co-operative bank” shall have the same meaning as assigned to it in clause (ii) of the Explanation to section 269SS.’.

CBDT has clarified through the press release dated 5th April 2017 that the restriction imposed on cash transaction by sections 269ST & 271DA inserted by the Finance Act 2017 to the Income-tax Act. The CBDT has clarified that the said cash transaction limit of Rs 2 Lakh will not apply to withdrawal from banks, cooperative bank and post offices. 

 2. Section 40A(3):- Any expenditure in respect of which payment is made in sum exceeding rs.10,000/- in a single day to a single person otherwise than by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account, shall not be allowed as deducation.

Further recent amendment by the Finance Act – 2019 (Part – II) has made the seller with turnover exceeding Rs. 50 Crore to provide facility or payment in digital mode by the purchaser. It is a game changer provision to move towards digital payment.

Government is in total mood to implement digital payment mode in the economy. And for this, the following decisions are under consideration:

  1. Mandatory for 5 start hotel to accept the payment exceeding Rs. 1,000/- in digital mode only.
  2. Mandatory for GST dealer to accept the payment in digital mode only if the transactions are B2B
  3. Mandatory for GST dealer to make the payment in cash if it wants to avail ITC set off.  It means no set off towards ITC if payment is any mode other than TDS.
  4. Mandatory for GST dealer like those dealing in automobile and vehicle to accept the payment in digital mode only as the purchaser may not be claiming ITC in such cases.

Get ready for another set of reforms on digital front now. All above decisions are under active consideration of the top bureaucrats. However, considering the present economic scenario, the decision is deferred for few months. Sooner or later, Get ready for Limit on Cash Sale under GST now.

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