In order to avoid fake invoicing and curb tax evasion the Central Board of Indirect Taxes and Customs (CBIC) has introduced new rule 86B vide notification number 94/2020 dated 22nd December, 2020. Rule 86B is made effective from 1st January 2021 wherein the registered person shall be required to pay 1% of GST liability in cash if total taxable supply (exclude zero rated and exempt supply) exceeds Rs. 50,00,000 in a month.
Example:- Mr. Prakash has made a sale of Rs. 1 crore of goods on which tax rate is 18% in month of January 2021. In this case, he can discharge his liability up to 99% through ITC and must pay Rs. 18,000 in cash, as per this rule.
Exception to RULE 86B Restrictions on use of amount available in electronic credit ledger:-
1) If the persons mentioned below have paid Rs.1 lakh or more in any of the one FY 19-20 or FY 20-21 as Income Tax under Income Tax Act, 1961.
- The registered person
- Proprietor, Karta or Managing Director of the registered person
- Any of the partners or whole time directors or any other person as the case may be.
Note:- Tax paid as per the income tax Act, 1961 includes tax paid as TDS, Advance tax and self-assessment tax.
2) If Registered Person has received refund amount of Rs. 1,00,000 or more on account of unutilised input tax credit in FY 19-20.
3) If the registered person under concern is any of the following:
- Government department
- Public sector undertaking
- Local authority
- Statutory Authority
4) The registered person has discharged his liability towards output tax through the electronic cash ledger for an amount which is in excess of 1% of the total output tax liability, applied cumulatively, up to the said month in the current financial year.
Case 1 to Exception 4:- Whether to pay in cash for Month of Jan-21 in following scenario ?
| Month | Output Liability | ITC | Paid in Cash |
| Apr-20 | 1,00,000 | 50,000 | 50,000 |
| May-20 | 1,20,000 | 1,20,000 | – |
| Jun-20 | 1,40,000 | 1,40,000 | – |
| Jul-20 | 1,60,000 | 1,60,000 | – |
| Aug-20 | 1,80,000 | 1,80,000 | – |
| Sep-20 | 2,00,000 | 2,00,000 | – |
| Oct-20 | 1,40,000 | 1,40,000 | – |
| Nov-20 | 1,60,000 | 1,60,000 | – |
| Dec-20 | 1,80,000 | 1,80,000 | – |
| Jan-21 | 2,80,000 | 2,80,000 | – |
| Total | 16,60,000 | 16,10,000 | 50,000 |
| 1% of Total Output Liability | 16,600 | ||
In above case there is no need to pay cash if entire liability can be offset by using eligible ITC.
Case 2 to Exception 4:- Whether to pay in cash for Month of Jan-21 in following scenario ?
| Month | Output Liability | ITC | Paid in Cash |
| Apr-20 | 1,00,000 | 90,000 | 10,000 |
| May-20 | 1,20,000 | 1,20,000 | – |
| Jun-20 | 1,40,000 | 1,40,000 | – |
| Jul-20 | 1,60,000 | 1,60,000 | – |
| Aug-20 | 1,80,000 | 1,80,000 | – |
| Sep-20 | 2,00,000 | 2,00,000 | – |
| Oct-20 | 1,40,000 | 1,40,000 | – |
| Nov-20 | 1,60,000 | 1,60,000 | – |
| Dec-20 | 1,80,000 | 1,80,000 | – |
| Jan-21 | 2,80,000 | 2,80,000 | – |
| Total | 16,60,000 | 16,50,000 | 10,000 |
| 1% of Total Output Liability | 16,600 | ||
In above case there is taxpayer has to pay Rs. 2,800 (ie 2,80,000 *1/100) in cash and balance 99% by using available ITC.
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Author Bio
DEAR KHUSHBOO,
I APPRECIATE YOUR EFFORT IN PARTING THE KNOWLEDGE TO OTHERS. WE NEED A HEALTHY DISCUSSIONS, OPINIONS AND CLARIFICATIONS. FURTHER IN YOUR ABOVE DISCUSSION, I PERSONALLY FEEL THAT WHILE QUOTING AN EXAMPLE IN THE BEGINNING OF THE ARTICLE YOU HAVE ERRED. YOU HAVE MENTIONED 18000 AS TAX PAYABLE AGAINST 1 CRORE SALE AS 1% AS PER THE ABOVE MENTIONED RULE. THIS SHOULD BE Rs. 1,00,000. PLEASE NOTIFY IF I HAVE MISTAKEN IN UNDERSTANDING THE CONCEPT.
) If the persons mentioned below have paid Rs.1 lakh or more in any of the one FY 19-20 or FY 20-21 as Income Tax under Income Tax Act, 1961.
The registered person Proprietor, Karta or Managing Director of the registered person Any of the partners or whole time directors or any other person as the case may be. Note:- Tax paid as per the income tax Act, 1961 includes tax paid as TDS, Advance tax and self-assessment tax.
i had paid 180000 income tax that includes tds ,tcs
and after that i got the refund of rs 120000
please tell whether i will be exempt from 86b
aur have to follow 86b rule
i am gst registered and having sales more than 50lac per month