GST NEW RULE 86B OF CENTRAL GOODS AND SERVICES ACT, 2017

GST rule 86B, Restrication on Utilization of ITC

As per GST Notification No. 94/2020 Dated 22 December, 2020, GST rule 86B has been introduced which has imposed 99% restricted on ITC  available in electronic credit ledger of Registered Person. According to this Law 1% of Output liability to be paid in cash. This limitation is applicable where the value of taxable supply other than exempt supply and zero-rated supply, in a month exceeds fifty lakh rupees.

Pre Implementation of Rule how was  ITC Utilization allowed under Act:-

However, the ITC available in the electronic credit ledger could always be fully utilised for discharging the output tax liability. The new Rule 86B has limited the use of ITC balance for paying its output tax liability.

Applicability Restriction after Post Implementation of Rules:-

Applicability: This rule is applicable to registered persons having taxable value of supply (other than exempt supply and zero-rated supply) in a month which is more than Rs.50 lakh. The limit has to be checked every month before filing each return.

Restriction imposed: The applicable registered persons cannot use ITC in excess of 99% of output tax liability. In simple words, more than 99% of the output tax liability cannot be discharged by using input tax credit.

Provided that the said restriction shall not apply where –

If the persons mentioned below have paid more than Rs.1 lakh 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.
  • If the registered person under concern has received a refund of amount greater than Rs.1 lakh in the preceding financial year on account of export under LUT or due to inverted tax structure.
  • If the registered person under concern has discharged his liability towards output tax by electronic cash ledger for an amount in excess of 1% cumulatively of the total output tax liability up to the said month in the current financial year.
  • If the registered person under concern is any of the following:
  • Government department
  • Public sector undertaking
  • Local authority
  • Statutory Authority

Author Bio

Qualification: CS
Company: A MANISH & ASSOCIATES
Location: MASUDA, Rajasthan, India
Member Since: 22 Dec 2019 | Total Posts: 1
My self Manish Kumar Arora i have experienced in accounting taxation and Roc compliances View Full Profile

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