If the 1% GST is not paid in cash, the registration will be suspended:
This statement is misleading.:
Rule 86B of the CGST Rules, 2017 does not mandate 1% cash payment in every case, nor does it automatically lead to suspension.
What the law actually says:
Where the value of taxable supplies (excluding exempt and zero-rated supplies) exceeds Rs 50 lakh in a month, a registered person cannot utilise ITC beyond 99% of the output tax liability. Accordingly, minimum 1% of output tax must be discharged through the electronic cash ledger.
However, the Rule itself carves out statutory exceptions where this restriction does not apply, including:
a) Where the registered person, or specified key managerial persons, have paid more than Rs 1 lakh as Income Tax in each of the last two financial years for which the due date under section 139(1) has expired.
b) Where the registered person has received a refund exceeding Rs 1 lakh in the preceding financial year on account of unutilised ITC under section 54(3), including exports or inverted duty structure.
c) Where the registered person has already discharged more than 1% of cumulative output tax liability in cash during the current financial year, in which case Rule 86B ceases to apply for the balance of that year.
d) Where the registered person is a Government Department, Public Sector Undertaking, local authority, or statutory body.
e) In respect of specified goods notified under Rule 31D, where tax is paid by the supplier on the basis of retail sale price, traders are exempt from the restriction to that extent.
Further, the Commissioner or an authorised officer may remove the restriction after due verification, as expressly provided under the Rule.
Bottom line: Rule 86B is a restrictive mechanism, not a penal provision. Suspension, blocking of ITC, or coercive calls cannot be justified without first testing the statutory conditions.
Please consult your financial advisor and CA before making any decision