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The Central Board of Indirect Taxes and Customs (CBIC) vide notification number 94/2020 dated 22nd December, 2020 has introduced new rule 86B. Rule 86B is gets effective from 1st day of January 2021.

As per new Rule 86B ITC has reduced from 10% to 5% of eligible ITC if ITC to be availed in respect of invoices/debit note not uploaded by suppliers in their GSTR-1/IFF.

As per sec 16(2) of CGST act, among other conditions for availing ITC, one of the condition that the taxpayer must have tax invoice or other tax paying document in respect of which person is claiming ITC. Rule 36 of CGST rules lays down document and other condition on basis of which the registered person can claim ITC. Sub rule (4) of rule 36 specifies the amount of ITC that can be claimed against the invoices/debit note uploaded and invoices/debit notes not uploaded by the suppliers.

As per existing rule ITC to be availed by registered person on invoices/debit note details of which not uploaded by supplier in GSTR-1 or  Invoice Furnishing Facility (IFF)., can not exceed 10% of the eligible credit available.

With effect 01.01.2021 CBIC has amended the said sub-rule to reduce the said percentage of ITC from 10% to 5% .

From 1st January 2021, however as per Rule 36(4), the ITC shall be available as per the invoices uploaded by respective suppliers either in their GSTR-1 or by using the Invoice Furnishing Facility (IFF).


From 01.01.2021 new rule 86B come into effect of CGST rule to restrict the amount available in electronic credit ledger which a registered person can use to discharge his output liability to 99% of such tax liability if the value of taxable supply other than exempted and zero rated supply , in a month exceed 50 lakh rupees. This rule overrides all rules.

Exception to Rule 86B

1. If said Person/Karta/Director/Trustees have paid more than Rs.1 Lakh of income tax, in last 2 F.Y.

2. If a registered person has received a refund of more than Rs.1 Lakh in preceding F.Y. for unutilized ITC in case of Zero rated supplies without payment of tax or inverted duty structure.

3. If a registered person has discharged his liability towards output tax by electronic cash ledger amount in excess of 1%  of total output liability upto said month in current F.Y.

4. If registered person is:

a. Government department

b. PSU

c. Local Authority

d. Statutory Body.

Author Bio

Arpit Gupta is founder partner of Arpit Gupta & Co. He is also a fellow member ICAI & ICWAI and practicing since more than a decade and his core area of practice is corporate law, international taxation, representing cross-border tax disputes, getting FDI Approvals, setting up subsidiaries, View Full Profile

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May 2024