“86B. Restrictions on the use of amounts available in electronic credit ledger. Notwithstanding anything contained in these rules, the registered person shall not use the amount available in the electronic credit ledger to discharge his liability towards output tax over ninety-nine percent of such tax liability, in cases where the value of taxable supply other than exempt supply and zero-rated supply, in a month exceeds fifty lakh rupees:
Provided that the said restriction shall not apply where –
(a) the said person or the proprietor or Karta or the managing director or any of its two partners, whole-time Directors, Members of Managing Committee of Associations or Board of Trustees, as the case may be, have paid more than one lakh rupees as an income tax under the Income-tax Act, 1961(43 of 1961) in each of the last two financial years for which the time limit to file a return of income under subsection (1) of section 139 of the said Act has expired; or
(b) the registered person has received a refund amount of more than one lakh rupees in the preceding financial year on account of unutilized input tax credit under clause (i) of the first proviso of sub-section (3) of section 54; or
(c) the registered person has received a refund amount of more than one lakh rupees in the preceding financial year on account of unutilized input tax credit under clause (ii) of the first proviso of sub-section (3) of section 54; or
(d) the registered person has discharged his liability towards output tax through the electronic cash ledger for an amount which is more than 1% of the total output tax liability, applied cumulatively, up to the said month in the current financial year; or
(e) the registered person is –
(i) Government Department; or
(ii) a Public Sector Undertaking; or
(iii)a local authority; or
(iv) a statutory body:
Provided further that the Commissioner or an officer authorized by him in this behalf may remove the said restriction after such verifications and such safeguards as he may deem fit.”.
It is stated that Rule 36(4) of CGST Rules, 2017 is regarding availing of ITC restriction whereas restriction on the use of amount available in Electronic Ledger is covered under Rule 86B of CGST Rules, 2017. Please note that ITC once availed as per Section 16 (Rules thereto i.e. 36) is credited to the Electronic Credit Ledger of the registered person and can be utilized for payment towards output tax as provided in Section 49 of the CGST Act, 2017 subject to the restrictions mentioned in Rule 86A & 86B.
It is important to note herein that Rule 86B overrides all other CGST Rules. This rule starts with a non-obstante clause and has an overriding impact on any other provision of the rules. If a registered person supplies taxable supply [not exempt nor export of goods or services with or without LUT) in a month more than Rs.50,00,000/-, then 1% of such tax liability shall be paid in cash.
Non-applicability of Rule 86B:-
This Rule is NOT applicable in the following cases:-
1. In the case 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. In the case where a registered person has received a refund of more than Rs 1 lakh rupees in the preceding financial year on account of export under LUT i.e. without payment of tax or Inverted Tax Structure;
3. In the case were cumulatively up to the said month in the current financial year registered person has discharged his output tax liability in cash which is more than 1% of the total output tax liability; [suppose in the Financial Year 2020-2021, up to November 2020, output tax liability comes to Rs 10 lakh and taxpayer deposited Rs 10,000/- in cash up to November 2020 then this rule is not applicable]
4. This rule not applicable to Govt department, PSU, Local Authority, and Statutory Body.
