GST rule 86B

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GST rule 86B,ITC restricted to 99% 1% of Output liability to be paid in cash

Applicability since which Month–: This Rule 86B will be applicable from GSTR 3B return of Jan 2021 which due date of filing will be as on 20th Feb 2021 or before.

As per GST Notification number, 94/2020-Central Tax dated 22nd Dec 2020, GST rule 86B has been introduced which has imposed 99% restriction on ITC (Input Tax Credit) available in electronic credit ledger of Registered Person. This means 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.

This essentially means you will have to plan your cash flows and incorporate outflow towards GST also.

Rs 50 lakhs limit to be checked for each month

As per said rule, a taxpayer cannot use Input Tax Credit in excess of 99% of output tax liability.


This Rule is not applicable in the following cases:-

1. Where the registered person deposited more than Rs. 1 lakh rupees as Income Tax under the Income-tax Act, 1961 in each of the last two financial years

2. Wherein registered person has received a refund more than Rs 1 lakh rupees in the preceding financial year on account of export under LUT or inverted tax structure

3. This rule not applicable to govt. department, PSU, local authority

4. Wherein cumulatively up to the said month in the current financial year registered person has discharged his output tax liability in cash which is in excess of 1% of the total output tax liability,

For example.

In the FY 2020-2021, up to November 2020, output tax liability comes to Rs 10 lakh and taxpayer deposited Rs 10,000/- in cash up to Nov 2020 then this rule is not applicable

Important Note:

A taxpayer has to track each month that cumulative discharge of output tax liability in cash in the current FY is more than 1% up to the filing of return.

Get your concerns addressed through us about the applicability of this rule 86B for your business.

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