Cash Purchase Limit of business expenditure and salable Goods As Per GST Law and Income Tax Law

Reply— There is no cash purchase/ sale limit under GST law, however cash transactions are restricted under Income tax law as follws—

Cash purchase limit (Rs. 10,000/-) — As per section 40A(3) of Income Tax Act, 1961, Where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, [or use of electronic clearing system through a bank account, exceeds ten thousand rupees,] no deduction shall be allowed in respect of such expenditure.

Section 269ST of Income tax Act— As per this provision, No person shall receive an amount of two lakh rupees 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.