Page 42 - DTPA Journal December 21

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draft their representation to the Department in order to They may also issue showcause notice for
circumvent the restriction of making 1% tax payment determination of tax dues under Section 73 or 74 which
through cash. has discussed in detail below.
Q15. What can be the legal consequences upon d) Demand proceedings u/s 73 or 74: Non-
non-compliance with these rules? compliance with the mandatory requirement of

Ans. There are multi fold implications of non- payment of 1% tax liability in cash for the applicable
compliance with Rule 86B of the CGST Rules 2017: cases amounts to incorrect utilization of input tax
credit. As per Section 73 or 74, where there is wrong
a) Non submission of GSTR-1:Rule 59 of the CGST
utilization of input tax credit, the Department can
Rules 2017 prescribes the provisions for furnishing proceed to determine such amount and require its
details of outward supplies in GSTR-1. As per this rule,
payment along with interest and penalty. Ofcourse
if a taxpayer who is required to pay tax at the rate of 1%
purpose of Section 73 and 74 are different with the
of the output tax liability in cash and fails to furnish his
intention of taxpayer (fraud, wilful misstatement or
GSTR-3B in any particular month, he will not be suppression of facts) separating the two.
allowed to upload his GSTR-1 of the subsequent tax
Having said this, it may be argued in such a situation,
period.
there was no avoidance of any tax liability. Hence,
For example, if a registered person does not file his there is no amount payable to the government.
GSTR-3B of January 2021 and he was liable to pay tax
Thereby, there cannot be any question of any tax
at the rate of 1% of output tax in cash, he will not be
liability or interest or penalty payable on the
allowed to furnish GSTR-1 of February 2021.
contravention of this provision. At most, the
b) Cancellation of Registration:Rule 21 of the Department can levy penalty under Section 125 which
CGST Rules 2017 which provides for cancellation of is the residuary provision for contravention of any of
registration has been modified to include the reference the provisions of the Act or rules. In this section, the
to violation of Rule 86B of the CGST Rules 2017. This maximum penalty prescribed is Rs. 25,000 under the
means that the registration of a person can be cancelled CGST Act 2017.
if fails to comply with the mandatory deposit of 1% of
Conclusion
the output tax liability in cash wherever applicable.
Though it may seem like Rule 86B is to severely
c) Scrutiny of returns: Scrutiny of returns can be
dampen the ease of doing business, the intent behind
carried out by the proper officer to verify the
the notification of the said provision should not be
correctness of the return as per Section 61 of the CGST
obscured. It is to catch hold of persons issuing fake
Act 2017. Thereafter, the discrepancies are invoices and are ‘fly by night’ operators. Most of the
communicated to the taxpayer for seeking explanation.
unscrupulous taxpayers and a handful of genuine
Non-payment of mandatory 1% cash element can
taxpayers would be covered within the ambit of this
attract the Department’s attention through this section.
rule. Any genuine taxpayer getting covered by this
After this process, if the Department does not find the provision and facing a cash crunch while making
explanation of the registered person to be satisfactory, payment of GST in cash should make an application to
they may proceed for Department Audit under Section
the jurisdictional Commissioner for removal of the
65 or Special Audit under Section 66 or the operations
restriction of Rule 86B on him.
of inspection, search and seizure under Section 67.

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