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Considering the difficulties being faced by taxpayers in filing GSTR-9 and GSTR-9C for FY 2017-18 it has been decided to extend the due dates in a staggered manner for different groups of States to 3rd, 5th and 7th February 2020 as under. Notifications will follow.

The due date to file returns of Income Tax Deducted at Source (TDS) for the quarter ended 31st December, 2019 is 31st January 2020. Late fees of Rs 200/day shall be payable for delay in filing the returns.

ജി എസ് ടി സോഫ്റ്റ്‌വെയർ തകരാറിന് ഇൻഫോസിസിന്16.25 കോടി രൂപ പിഴ.

1379.71 കോടി രൂപയുടെ കരാർ ആണ് ജി എസ് ടി പോർട്ടലിന്റെ പ്രവർത്തനം ഏറ്റെടുത്തത് നടത്താൻ ഇൻഫോസിസിന് നൽകിയിട്ടുള്ളത്. ഇതുവരെ 437.81 കോടി രൂപ നൽകിയതായും സോഫ്റ്റ്‌വെയർ ശരിയായി പ്രവർത്തിക്കാത്തതിന് 16.25 കോടി രൂപ പിഴ ചുമത്തിയതായും ശ്രീ ജേക്കബ് സന്തോഷിന് ലഭിച്ച വിവരാവകാശ രേഖ വ്യക്തമാക്കുന്നു.

ഒരു കോടിയിലേറെ വ്യാപാര സ്ഥാപനങ്ങൾ ജി എസ് ടി യിൽ രജിസ്റ്റർ ചെയ്തിട്ടുണ്ട്. നിലവിലെ സോഫ്റ്റ്‌വെയർ പ്രകാരം 1.50 പേർക്ക് മാത്രമെ ഒരു സമയത്ത് പോർട്ടലിൽ കയറാൻ കഴിയുകയുള്ളൂ. അങ്ങനെ വരുമ്പോൾ റിട്ടേൺ സമർപ്പിക്കേണ്ട അവസാന തിയതികളിൽ തിരക്ക് കാരണം സൈറ്റ് മിക്കവാറും നിശ്ചലമാകുകയും ഇത് മൂലം സർക്കാരിന് ജി എസ് ടി പിരിവ് ക്ര്ത്യമായി നടത്താൻ കഴിയാതെ വരുന്നു. മറുവശത്ത് സമയത്ത് റിട്ടേൺ സമർപ്പിക്കാൻ കഴിയാത്ത വ്യാപാരികൾ അവരുടേതല്ലാത്ത കാരണത്താൽ ലേറ്റ് ഫീ അടയ്ക്കാൻ നിർബന്ധിതമാകുന്നു. ഇതിനെല്ലാം ഉത്തരവാദിത്വം സോഫ്റ്റ്‌വെയർ തകരാറാണ് എന്നാണ് വിവരാവകാശ നിയമപ്രകാരം ജി എസ് ടി നെറ്റ് വർക്ക് നൽകിയ മറുപടിയിൽ വ്യക്തമാകുന്നത്.

GSTR 1 due date extended to 17/1/2020

Please file all pending returns to avoid huge penalties

*Please note that September 2019 return due date is last date to rectify any error pertaining to year 2018-19.*

1) You can claim any missed ITC of 18-19 till september 2019 return.

2) If any RCM unpaid, pay it & claim ITC till september 2019 return.

3) Issuance of debit note/credit note related to your supply pertaining to year 2018-19.

4) If forgot to upload any invoice in GSTR-1 than upload it otherwise it will be blocked after September 2019 return.

5) Any rectifications/amendments need to be done in GSTR-1 than rectify/amend it otherwise it will be blocked after September 2019 return.

6) Reconcile your GSTR-2A with ITC claimed.

7) In maximum cases your 'Other incomes' are taxable, please look to it. Raise invoice for year 18-19 & pay the tax.

😎 Reconcile your Sales figure/ ITC claimed/ RCM liability with books & GSTR-3B. If any mismatch arises,rectify it before September 2019 return. Also maintain a register of reconciliation done.

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Last Chance to update your GST returns....

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*Outcome of 32nd GST Council Meeting -FM Arun Jaitley press meet*

*1. Threshold limit increased to 40 Lakhs*
Effective April 1, the GST exemption threshold has been raised from Rs 20 lakh to Rs 40 lakh. For hilly states and those in the North East, the threshold has been doubled to Rs 20 lakh.

*Earlier in a press talk AP FM said increased to 50lakhs, but it is increased to 40lakhs only as said by FM*

*2. Power to states*
Now states will be able to choose if they want to keep the GST exemption limit at Rs 20 lakh or Rs 40 lakh, Jaitley said.

*3. Composition limit increased to 1.5Cr from the present 1 cr*

The existing Composition Scheme turnover threshold raised to Rs 1.5 crore.
Those who use the scheme from April 1,2019

*4 Quarterly payment and Annual Return*
Now Composition tax payers will pay tax quarterly, but file returns annually.

*5 Composition scheme for services*
Those providing services or mixed supplies (goods and services) with a turnover up to Rs 50 lakhs will now be entitled to avail composition scheme.

*6 Rate for services under comp scheme @ 6%*
Compounding rate for services under composition scheme is fixed at 6 percent.

*7 RealEstate*
A committee has been set up to consider real estate GST rates, a consensus is yet to be achieved, says FM Arun Jaitley.

*8 Calamity cess by Kerela @1%*
GST Council lets Kerala levy 1% cess for 2 years on intra-state sales: Finance Minister arun jaitley.

Ministry of Finance
Recommendations made during 31st Meeting of the GST Council
Posted On: 22 DEC 2018 4:45PM by PIB Delhi
The GST Council in its 31st meeting held today at New Delhi made the following policy recommendations:
1. Therewouldbeasinglecashledgerforeachtaxhead.Themodalitiesforimplementation would be finalised in consultation with GSTN and the Accounting authorities.
2. A scheme of single authority for disbursement of the refund amount sanctioned by either the Centre or the State tax authorities would be implemented on pilot basis. The modalities for the same shall be finalized shortly.
3. The new return filing system shall be introduced on a trial basis from 01.04.2019 and on mandatory basis from 01.07.2019.
4. The due date for furnishing the annual returns in FORM GSTR-9, FORM GSTR-9A and reconciliation statement in FORM GSTR-9C for the Financial Year 2017 – 2018 shall be further extended till 30.06.2019.
5. The following clarificatory changes, inter-alia, shall be carried out in the formats/instructions according to which the annual return / reconciliation statement is to be submitted by the taxpayers:
i. Amendment of headings in the forms to specify that the return in FORM GSTR-9 &FORM GSTR-9A would be in respect of supplies etc. ‘made during the year’ and not ‘as declared in returns filed during the year’;
ii. All returns in FORM GSTR-1&FORM GSTR-3B have to be filed before filing of FORM GSTR-9&FORM GSTR-9C;
iii. All returns in FORM GSTR-4 have to be filed before filing of FORM GSTR-9A;
iv. HSN code may be declared only for those inward supplies whose value independently
accounts for 10% or more of the total value of inward supplies;
v. Additional payments, if any, required to be paid can be done through FORM GST DRC-
03 only in cash;
vi. ITC cannot be availed through FORM GSTR-9 &FORM GSTR-9C;
vii. All invoices pertaining to previous FY (irrespective of month in which such invoice is reported in FORM GSTR-1) would be auto-populated in Table 8A of FORM GSTR-9;
viii. Value of “non-GST supply” shall also include the value of “no supply” and may be

reported in Table 5D, 5E and 5F of FORM GSTR-9;
ix. Verification by taxpayer who is uploading reconciliation statement would be included in
FORM GSTR-9C.
6. The due date for furnishing FORM GSTR-8 by e-commerce operators for the months of
October, November and December, 2018 shall be extended till 31.01.2019.
7. The due date for submitting FORM GST ITC-04 for the period July 2017 to December 2018 shall be extended till 31.03.2019.
8. ITC in relation to invoices issued by the supplier during FY 2017-18 may be availed by the recipient till the due date for furnishing of FORM GSTR-3B for the month of March, 2019, subject to specified conditions.
9. All the supporting documents/invoices in relation to a claim for refund in FORM GST RFD-01Ashall be uploaded electronically on the common portal at the time of filing of the refund application itself, thereby obviating the need for a taxpayer to physically visit a tax office for submission of a refund application. GSTN will enable this functionality on the common portal shortly.
10. The following types of refunds shallalso be made available throughFORM GST RFD- 01A:
i. Refund on account of Assessment/Provisional Assessment/Appeal/Any Other Order;
ii. Tax paid on an intra-State supply which is subsequently held to be inter-State supply and
vice-versa;
iii. Excess payment of Tax; and
iv. Any other refund.
11. In case of applications for refund in FORM GST RFD-01A(except those relating to refund of excess balance in the cash ledger)which are generated on the common portal before the roll out of the functionality described in point (10) above, and which have not been submitted in the jurisdictional tax office within 60 days of the generation of ARN, the claimants shall be sent communications on their registered email ids containing information on where to submit the said refund applications. If the applications are not submitted within 15 days of the date of the email, the said refund applications shall be summarily rejected, and the debited amount, if any, shall be re-credited to the electronic

credit ledger of the claimant.
12. Onemorewindowforcompletionofmigrationprocessisbeingallowed.Theduedatefor the taxpayers who did not file the complete FORM GST REG-26 but received only a Provisional ID (PID) till 31.12.2017 for furnishing the requisite details to the jurisdictional nodal officer shall be extended till 31.01.2019. Also, the due date for furnishing FORM GSTR-3B and FORM GSTR-1 for the period July, 2017 to February, 2019/quarters July, 2017 to December, 2018 by such taxpayers shall be extended till 31.03.2019.
13. Late fee shall be completely waived for all taxpayers in case FORM GSTR-1, FORM GSTR-3B &FORM GSTR-4 for the months / quarters July, 2017 to September, 2018, are furnished after 22.12.2018 but on or before 31.03.2019.
14. Taxpayers who have not filed the returns for two consecutive tax periods shall be restricted from generating e-way bills. This provision shall be made effective once GSTN/NIC make available the required functionality.
15. Clarifications shall be issued on certain refund related matters like refund of ITC accumulated on account of inverted duty structure, disbursal of refunds within the stipulated time, time allowed for availment of ITC on invoices, refund of accumulated ITC of compensation cess etc.
16. Changes made by CGST (Amendment) Act, 2018, IGST (Amendment) Act, 2018, UTGST (Amendment) Act, 2018 and GST (Compensation to States) Amendment Act, 2018 and the corresponding changes in SGST Acts would be notified w.e.f. 01.02.2019.
The requisite Notifications/Circulars for implementing the above recommendations of the GST Council shall be issued shortly.

*****

*BREAKING NEWS - GST*

• GSTR-9 due date extended to 30th June 2019

• Return Filing Penalties waved off till 31st March 2019

• New return filing system will be started on a trial basis from April 1, to be implemented mandatory by July 1

• Rate reduction to come into effect from Jan 1

• Tax on cinema tickets of up to Rs 100 has been brought down to 12 percent.
• For tickets above Rs 100, GST has been reduced to 18 percent.
• Revenue implication for reduction in cinema tickets is Rs 900 crore.
• GST rate on special flights for pilgrims lowered for economy at 5 percent and business class at 12 percent.
• Monitors and screen up to 32 inches, gear boxes, retreated tyres, power banks of lithium ion batteries, video games and other sports related items have been reduced from 28 percent to 18 percent.
• Except 13 auto parts and cement, rates on all items have been reduced.
• Services supplied by banks to basic savings bank account and Jan Dhan accounts will be exempt from GST.
• Total revenue impact on reduction of rates is Rs 5,500 crore for full financial year.
• Brought down taxes of all building material items except cement.

Official press release will be shared soon.

*BREAKING NEWS : 31st Meeting of the Goods and Services Tax Council, 22nd Dec 2018, New Delhi*

• 33 items have come down from 18% tax slab to 12% and 5% tax bracket as they are common man’s consumption goods.

• 7 items (including lithium ion battery, VCR and tyres) have come down from their 28% slab to 18% tax slab

• Only 34 items will be taxed at 18% or more

• All items except luxury goods would be taxed under 28%

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A person should take a Registration, within thirty days from the date on which he becomes liable to registration, in such manner and subject to such conditions as are prescribed under the Registration Rules. A Casual Taxable person and a non-resident taxable person should, however, apply for registration at least 5 days prior to the commencement of business.

If you want to buy a car in one city and transfer it to another then ensure that it is done after the e-Way bill and all GST formalities are completed, else there is a possibility that your new car will be seized by the tax authorities and you may end up paying a penalty.

This follows a ruling by the Kerala High Court in a matter where Vishnu Mohan from Thiruvananthapuram went to Puducherry and purchased a car from a dealer. The buyer got the vehicle temporarily registered in Puducherry and entrusted it to the dealer to transport it to Thiruvananthapuram on payment of transport charges. I-GST (Integrated Goods and Services Tax) was charged on transport charges. However, the car was detained in Kerala.

The detention was made on three grounds — the consignment is an inter-State supply of goods being more than ₹50,000 which makes e-Way bill mandatory, temporary registration at Puducherry was seen with suspicion and compensation cess was collected at 20 per cent instead of 25 per cent.

Since rules prescribe release only after payment of penalty, a notice was served. Both the buyer and the dealer approached the Court and argued that the said transportation was caused by unregistered person and accordingly, e-Way bill requirement should not arise under K-SGST (Kerala State GST) Rules.

Transportation, e-Way bill
The petitioners also submitted that the matter involved transportation of ‘used personal and household effects’ hence there is no requirement to generate e-Way bill. But the tax authorities contended that the said vehicle is not a used vehicle. In the instant transaction, the dealer could not have completed the transaction of selling the car until it is delivered to the purchaser at the agreed destination.

The Court ruled that if the conditions under the Act and Rules are not complied with, Section 129, which talks about confiscation of goods, will apply. The petitioners are entitled to adjudication, but they will have to prove that the goods being transported stand exempted from the rigours of the GST regime, it said.

However, it restrained itself from deciding whether the purchase of the car was a completed intra-State sale and that only transportation was an inter-State event. Further, it did not comment on the fact whether such vehicle was ‘used personal and household effects’ and e-Way bill would apply. It held that all these questions shall be decided by the adjudication authorities. Since there has been interim custody of the goods, the court advised that the petitioners can follow that procedure and secure the interim custody of the goods.

Experts feel that it would be imperative to know what the GST compliance requirements are before buying cars from outside the State. “The ruling accentuates the fact that everyone needs to understand the e-Way bill requirements under GST before causing any movement of goods of more than ₹50,000,” Harpreet Singh, Partner in KPMG, said.

According to him, though the Court has restrained to analyse whether e-Way bill is required where individuals entrust the goods with the dealer for transportation to another destination, “it clearly lays down that authorities are within their powers to invoke confiscation provisions under GST law even in case of minor infraction of law

All taxpayers filing a return in GSTR-1 to GSTR-3, other than ISD’s, casual/non-resident taxpayers, taxpayers under composition scheme, TDS/TCS deductors, are required to file an annual return. Casualtaxpayers, nonresident taxpayers, ISDs and persons authorized to deduct/collect tax at source are not required to file annual return.

Conditions to be fulfilled for entitlement of Input Tax Credit

A registered person will be eligible to claim Input Tax Credit (ITC) on fulfillment of the following conditions:

Possession of a tax invoice or debit note or document evidencing payment

Receipt of goods and/or services / goods delivered by supplier to other person on the direction of registered person against a document of transfer of title of goods Furnishing of a return

Where goods are received in lots or installments ITC will be allowed to be availed when the last lot or installment is received.

Failure to the supplier towards supply of goods and/or services within 180 days from the date of invoice, ITC already claimed will be added to output tax liability and interest to paid on such tax involved. On payment to supplier, ITC will be again allowed to be claimed

No ITC will be allowed if depreciation have been claimed on tax component of a capital good
If invoice or debit note is received after:
the due date of filing return for September of next financial year or filing annual return whichever is later

No ITC will be allowed Common credit of ITC used commonly for Effecting exempt and taxable supplies Business and non-business activity

Enhancements in E-Way Bill System w.e.f 16.11.2018

Checking of duplicate generation of e-way bills based on same invoice number : The e-way bill system is enabled in a way that if the consignor has generated one e-way bill on the particular invoice, then he or consignee or transporter will not be allowed to generate one more e-way bill on the same invoice number. If the transporter or consignee has generated one e-way bill on the consignor’s invoice, then if any other party (consignor, transporter or consignee) tries to generate the e-way bill, the system will alert that there is already one e-way bill for that invoice, and further it allows him to continue, if he wants.

CKD/SKD/Lots for movement of Export/Import consignment : CKD/SKD/Lots supply type can now be used for movement of the big consignment in batches, during Import & Export also. Delivery challan and tax invoice need to accompany goods as prescribed in Rule 55 (5) of CGST Rules, 2017

Shipping address in case of export supply type : For Export supply type, the ‘Bill To’ Party will be URP or GSTIN of SEZ Unit with state as ‘Other Country’ and shipping address and PIN code can be given as the location (airport/shipping yard/border check post/ address of SEZ), from where the consignment is moving out from the country

Dispatching address in case of import supply type : For Import supply, the ‘Bill From’ Party will be URP or GSTIN of SEZ Unit with state as ‘Other Country’ and dispatching address and PIN code can be given as the location (airport/shipping yard/border check post/ address of SEZ), from where the consignment is entering the country.

Enhancement in ‘Bill To – Ship To’ transactions : EWB generation is now categorized to four types now Regular and Bill to Ship to, Bill from Dispatch from & combination of both.

Changes in Bulk Generation Tool : Facility of EWB generation through the Bulk Generation Tool has been enhanced.

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Timeline Photos

Who can cancel registration?

Cancellation of GST Registration

1. Proper officer on his own motion
2. Application by registered person
3. Application by legal heir of registered person, in case of death of such person

Grounds for cancellation of registration:

1. Business has been discontinued.
2. Business has been transferred fully due to death or amalgamation or demerger or otherwise dispose of.
3. Any change in the constitution of business.
4. Person no longer liable to be registered, except in case of the person who registered himself voluntarily. (Note: Person registered voluntarily shall be allowed to cancel registration only after expiry of one year from the effective date of registration.)

Grounds where proper officer may cancel the registration

A proper officer at his own discretion may cancel the registration after giving an opportunity of being heard in the following situation:

1. If a registered person has contravened any provisions of the Act or rules made thereunder.
2. Person paying tax under composition scheme has not furnished the return for three consecutive tax period.
3. Person paying tax other than composition scheme has not furnished the return for a continuous period of six month.
4. Person who got voluntary registration but not commenced the business within 6month from the date of registration.
5. If registration was obtained by means of fraud, wilful misstatement or suppression of fact.

What are the implication after cancellation?

1. Cancellation of registration will not affect the liability of a person to pay tax and other dues or to discharge any obligation under this Act or the rules made thereunder for any period prior to the date of cancellation.

2. After cancellation of registration credit of input tax in respect of inputs held in stock or inputs contained in semi-finished or finished goods held in stock and of capital goods or plant and machinery on the day immediately preceding the date of such cancellation or the output tax payable on such goods, whichever is higher shall be paid by way of debit in the electronic credit ledger or electronic cash ledger.

Impact of cancellation of registration under the SGST Act or UTGST Act

If registration is cancelled under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act, as the case may be, then it shall be deemed that registration under this Act also cancelled.

Procedure for cancellation of registration by registered person

1. Submit an application in Form GST REG-16 through a common portal by attaching relevant documents within 30days of occurrence of the event.
2. Above form shall include the following details

a. Inputs held in stock or inputs contained in semi-finished or finished goods held in stock and of capital goods held in stock on the date from which the cancellation of registration is sought.

b. Details of payment of liability if any.

Last Date to file GSTR-1 is tommarow.

Subject: Extension of time limit for submitting the declaration in FORM GST TRAN-1 under rule 120A of the Central Goods and Service Tax Rules, 2017

In exercise of the powers conferred by rule 120A of the Central Goods and Services Tax Rules, 2017 read with section 168 of the Central Goods and Services Tax Act, 2017, the Commissioner, on the recommendations of the Council, hereby extends the period for submitting the declaration in FORM GST TRAN-1 till 31st October, 2017.

The deadline for filing GSTR 1 has been extended to October 10, Jaitley said. The original deadline was tomorrow, i.e. September 10.

As per Section 164 (2) of the Companies Act, 2013, a person is not eligible to appoint and continue as a director of a company, if he is or has been a director of a company, which has not filed financial statements or annual returns for any continuous period of three financial years.

MCA has informed all stakeholders that any person disqualified under section 164(2) of the Companies Act, 2013 [the Act] is advised not to act as director during the period of the disqualification and not to file any document or application with MCA as the same shall be summarily rejected. However, this shall be without prejudice to the liability of the said person for violation of section 164(2) read with section 167 of the Act including the action under section 448 r/w 447 of the wherever warranted.

Book Keeping & GST registration Services @ 2999/- for Small Scale Business

Rs 2 Lakh Cash Transaction Limit w.e.f 01-Apr-2017 | Details & Examples

As per Section 269ST, any person who enters into a transaction of Rs 2 Lakh or above in cash, will be liable to a penalty of an amount equivalent to the amount of transaction.

For example : If you buy an expensive watch for cash worth Rs 5 Lakh, it is the shopkeeper who will have to pay the tax (penalty) of Rs 5 Lakh. So, here the tax rate is 100%.

With effective from 1st April, 2017, 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.

The new Cash transaction limit is not applicable, if a person receives the amount through an Account Payee Cheque (or) an Account Payee Bank Draft (or) through use of electronic clearing system through a bank account.

Kindly note that Penalty u/s 271DA will be imposed on a person who receives a sum of Rs 2 Lakh and above in cash. The extent of penalty will be a sum equal to the amount of such receipt. The said penalty shall however not be levied if the person proves that there were good and sufficient reasons for such contravention.

Section 269ST & Rs 2 Lakh Cash Transaction Limit – Examples

Let us understand the above three points with examples;

A. Single Person : Cash Receipt of Rs 2 lakh or more, from a single person in a day is not allowed even if the amount has been paid through multiple transactions during the day which are below Rs 2 lakh.

For example : Mr Virat buys a gold chain worth Rs 2 Lakh and pays the amount by cash to Mr Sonesh on a single day in 4 equal installments of Rs 50,000 each. As Mr Sonesh accepted cash worth Rs 2 Lakh from a single person and in a single day, section 269ST is applicable in this case. Sonesh has to pay a penalty of Rs 2 Lakh.

B. Single Transaction : Cash receipts of Rs 2 Lakh or more which are related to a single transaction are prohibited.

For example : Mr Kejriwal goes through a medical surgery and the hospital charges him a bill of Rs 4 Lakh. Kejriwal clears the bill in 4 installments of Rs 1 Lakh each on four different dates. Here, the cash receipts got by hospital are less than Rs 2 Lakh and have been received on different dates.

Whether this transaction violates section 269ST? – Yes. Hospital has to pay the penalty. Because, they received the payments with respect to single bill / transaction. So, splitting of payments over several days is prohibited.

C. Single Event / Occasion : Cash transactions or cash receipts related to a single event or occasion, can not be more than Rs 2 Lakh.

For example : Nagachaitanya gets married to Samantha. On their wedding occasion, their relatives gifted Cash amount worth Rs 10 Lakh on different dates. Even if we assume that each person has gifted cash worth less than Rs 2 Lakh, are these receipts come under the purview of Section 269ST? Is penalty applicable?

Yes, penalty can be levied. Here, marriage is a ‘single occasion’ and cash gifts worth Rs 2 Lakh or more can not be received from relatives and other persons.

Can I make Cash Deposit / Cash Withdrawal of more than Rs 2 Lakh from my Bank?

It has been decided by the Govt that the restriction on cash transaction shall not apply to withdrawal of cash from a bank, co-operative bank or a post office savings bank. Necessary notification in this regard is being issued.

What about Cash deposits at Bank? This can be a little tricky.. For example, if you deposit Rs 10 Lakh in a single day in your Bank account, it is then assumed that you have received cash receipts of more than Rs 2 Lakh and the same has been deposited into the banking system. If that is not the case, you may have to prove it otherwise, that you have received this amount from different persons on different dates..

Important Points

Based on my interpretation of Section 269ST, payment modes like bearer cheque and self-cheque will also be considered on par with Cash based transactions only.
It has been clearly stated that penalty (if any) is chargeable to an individual who violates section 269ST, even if you do not have PAN and/or is not a tax assessee.
The restriction of receipt of money in Cash of Rs 2 Lakh or above in cash is applicable irrespective of whether it is for personal / business purpose, capital or revenue in nature, tax-free or taxable income.
Kindly note that the payer of money is not liable to pay any penalty, it is the receiver of cash who has to bear the penalty u/s 271DA .
The main objective of the central Govt for implementing this amendment is to discourage payments by cash and curb black money menace to certain extent. Let’s hope that they provide more details / clarity on nitty-gritty of section 269ST & Rs 2 Lakh Cash Transaction limit.

Section 40A(3): Disallowance of Expenses: Cash Payments

Section 40A(3)(a) of the Income Tax Act provides that any expenditure incurred in respect of which payment is made in a sum exceeding Rs. 10,000/- in a single day otherwise than by an account payee cheque drawn on a bank or by an account payee bank draft or through use of electronic clearing system, shall not be allowed as a deduction.

Section 40A(3)(b) also provides for deeming a payment as profits and gains of a business or profession if the expenditure is incurred in a particular year but the payment is made in any subsequent year in a sum exceeding Rs 10,000/- otherwise than by an account payee cheque or by an account payee bank draft or through use of account clearing system.

By requiring payments to me made by an account payee instrument, it is possible to verify the genuineness of the transaction thereby mitigating the risk of evasion of income tax.

It is pertinent to be noted that Section 40A(3) only disallows for any expenditure incurred. Therefore, purchase of capital assets is not covered under the purview of this Section

There are certain other exceptions as well to the provisions stated in Section 40A(3)(a) and in Section 40A(3)(b). These provisions have been stated in Rule 6DD

Rule 6DD: Exceptions to provisions of Section 40A(3)

No disallowance of expenses exceeding Rs. 10,000 in a day made otherwise than by an account payee cheque or account payee bank draft should be made in case of the following expenses:-

1. Where the Payment is made to:-

Reserve Bank of India or any banking company;
State Bank of India or any subsidiary bank;
Any co-operative Bank or Land Mortgage Bank;
Any primary agricultural credit society or any primary credit society;
Life Insurance Corporation of India;
2. Where the payment is made to the Govt and, under the rules framed by it, such payment is required to be made in legal tender;

3. Where the payment is made by

Any Letter of Credit Arrangements through a Bank
A Mail or telegraphic transfer through a Bank
A Book adjustment from any account in a bank to any other account in that or any other bank
A Bill of exchange made only payable to a Bank
The use of electronic clearing system through a Bank Account
A Credit Card
A Debit Card
4. Where the payment is made by way of adjustment against the amount of any liability incurred by the payee for any goods supplied or services rendered by the assessee to such payee

5. Where the payment is made to the cultivator, grower or producer for the purchase of the following

Agricultural or Forest produce; or
Produce of Animal Husbandry (including livestock, meat, hides and skins)
Fish or Fish Products; or
Products of Horticulture of Apiculture
6. Where the payment is made for the purchase of the products manufactured or processed without the aid of power in a cottage industry, to the producer of such products;

7. Where the payment is made in a village or town, which on the date of such payment is served by any bank, to any person who ordinarily resides or is carrying on any business, profession or vocation in any such village or town

8. Where any payment is made to an employee of the assessee or the heir of any such employee, on or in connection with the retirement, retrenchment, resignation, discharge or death of such employee, on account of gratuity, retrenchment compensation or similar terminal benefit and the aggregate of such sums payable to the employee or his heir does not exceed Rs 50,000

9. Where the payment is made by an assessee by way of salary to his employee after deducting the income tax from salary in accordance with the provisions of the Income Tax Act , and when such employee:-

Is temporarily posted for a continuous period of 15 days or more in a place other than his normal place of duty or on a ship; and
Does not maintain any account in any bank at such place or ship
10.Where the payment was required to be made on a day on which the banks were closed either on account of holiday or strike. It is pertinent to note here that such payment would be allowed as an expense only when it has been proved that the payment was required to be made on the day on which the bank was closed and the payment could not have been made on a working day.

11. Where the payment is made by any person to his agent who is required to make payments in cash for goods or services on behalf of such person

12. Where the payment is made by an authorised dealer or a money changer against purchase of foreign currency or travellers cheque in the normal course of business