Cash Sale limit under GST/Income Tax

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The Central Goods and Services Tax (CGST) Act 2017 does not explicitly restrict cash transactions. But there are certain Invoice rules which have to be followed carefully.

PROCEDURE FOR ISSUING TAX INVOICE UNDER GST REGIME

Tax Invoice Issuance:

Section 31(1) of the CGST Act 2017 mandates the issuance of tax invoices for all taxable supplies, containing description, quantity, value, and rate of tax charged.
For goods, the tax invoice should be issued before or at the time of removal if it involves movement, or at the time of delivery otherwise (Section 31(1)(a)).
For services, the tax invoice should be issued before or within 30 days of the provision of the service. However, for certain entities like banks and insurance companies, the time limit is extended to 45 days (Section 31(1)(b)).

Details to Include in Tax Invoices:

Section 31(2) specifies the details to be included in tax invoices, such as the name, address, and GSTIN of the supplier and recipient, consecutive serial number, date of issue, HSN code for goods or SAC code for services, description, quantity, total value, taxable value, rate of tax, place of supply, and signature or digital signature of the supplier or authorized representative.

Bill of Supply for Exempted Goods/Services:

Section 31(3) provides that for the supply of exempted goods or services and those under the composition scheme, a bill of supply should be issued instead of a tax invoice, containing all details except the rate and amount of tax.

Advance Payment and Refund Vouchers:

Rules 50 and 51 prescribe the issuance of receipt vouchers for advance payments received against any supply and refund vouchers if the supply is not made against such advance. These vouchers should contain all particulars as in tax invoices, along with the amount of advance taken or refunded.

Credit Note and Debit Note Issuance:

Section 34(1) states that after issuing the tax invoice, if the taxable value and tax charged are found to be higher, or in case of return of goods by the recipient, a credit note should be issued.
Section 34(3) mandates the issuance of a debit note if the taxable value and tax charged are found to be lesser after issuing the tax invoice.

Payment Voucher and Delivery Challan:

Rule 52 requires persons liable to pay tax on a reverse charge basis to issue payment vouchers containing all details as in tax invoices, along with the details of tax paid.
Rule 55 mandates the issuance of delivery challans for transporting goods for job work or other purposes, containing all details as in tax invoices.

However, in a bid to curb black money, the government has imposed various restrictions on cash receipts, payments, and withdrawals under the Income Tax Act 1961. These measures aim to promote transparency and discourage the use of cash in high-value transactions. Let’s delve into the key provisions and implications of these restrictions:

1. TDS on Cash Withdrawals:

Section 194N of the Income Tax Act mandates that banks, including private, public, cooperative, and post offices, deduct TDS at 2% for cash withdrawals between Rs. 20 lakhs to 1 crore if the withdrawer has not filed tax returns for three years.
For cash withdrawals exceeding Rs. 1 crore, TDS is levied at 5%.

2. Section 269ST – Cash Transaction Limits:

Section 269ST prohibits individuals from receiving Rs. 2,00,000 or more in cash:
- In aggregate from a person in a single day.
- In respect of a single transaction.
- In respect of transactions relating to one event or occasion from a person.
These restrictions apply to the receiver of cash transactions, not the payer.

3. Non-Applicability of Section 269ST:

Section 269ST does not apply to certain entities or transactions, including those involving the government, banking companies, post offices, cooperative banks, specified nature transactions, or as notified by the Central Government.

4. Penalty and Exemptions:

Violation of Section 269ST attracts penalties under Section 271DA, equal to the amount of cash received. However, no penalty is imposed if the receiver proves valid reasons for the contravention.
Penalty is imposed on the receiver, not the payer.
The provision applies even if the defaulter does not have a PAN, and bearer or self-cheques are considered as cash.
It applies to personal as well as business purposes.

5. Expenditure Made in Cash:

Section 40A(3) restricts expenditure exceeding Rs. 10,000 in a single day to a single person, not made via account payee cheque, bank draft, or electronic clearing system.
The threshold limit is extended to Rs. 35,000 for payments related to plying, hiring, or leasing goods carriage.

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