The Goods and Services Tax Network (GSTN) has introduced a new tab ‘Rule-86B’ in the GST Portal restricting the use of Input Tax Credit (ITC) amount in the Electronic Cash Ledger (ECL). You can access the new tab under the Services.
The use of Input Tax Credits (ITCs) from the electronic credit ledger to settle output tax liabilities is subject to limits set forth in Rule 86B. All other CGST Rules are superseded by this rule.
As a measure to curb fraudulent invoice transactions, Rule 86-B was introduced as a new addition to the Central Goods and Services Tax Rules 2017 through Notification No. 94/2020 – Central Tax, issued on December 22, 2020.
According to this rule, if the value of taxable supply (excluding exempt and zero-rated supply) in a month exceeds Rs. 50 lacs, a registered person cannot use more than 99% of the amount available in their electronic credit ledger to settle their output tax liability. As stated above, this rule supersedes all other CGST Rules. The 1% will remain and such portions will not be refunded.
The mentioned Rule will only apply if the turnover, excluding exempted and export turnover, exceeds Rs. 50 lacs in a month. The threshold is assessed monthly, before filing each return. Upon reviewing the restrictions and exceptions outlined in Rule 86B, it becomes evident that this rule is applicable exclusively to large taxpayers.
Also, the Rule includes several exemptions, such as exporters, suppliers facing an inverted duty structure, and taxpayers with a presence in the Income Tax system. This rule and introduction of the new tab has no impact on the MSMEs.
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