Rajasthan HC admits Petition challenging GST Rule Limiting use of ITC available in Electronic Credit Ledger for Discharging Output Tax Liability [Read Petition]

The Rajasthan High Court has recently admitted a petition challenging Rule 86B of Central GST Rules, 2017 wherein the Court has issued a notice to the Centre.

Rule 86B limits the use of input tax credit (ITC) available in the electronic credit ledger for discharging the output tax liability. This rule has an overriding impact on all the other CGST Rules.

The petitioner S.S. Marketing contended before the High Court that the registered person is entitled to take credit of eligible input tax as self-assessed in his return.

It was also submitted that the original return filing design involved the linkages with invoices having back and forth movement between sellers and buyers and there was a flow of return amongst GSTR1, GSTR-2 and ending with GSTR-3. But it could not be implemented. It was noticed that the system of GSTR -1, 2 & 3 was complicated and hence, it was decided to limit the implementation of GST with GSTR-1 and GSTR-3B.

It was also submitted that in view of the lacuna in the system of matching, reversal and reclaim of input tax, the notification no. 94/2020 Central Taxes, dated 22.12.2020 amended CGST Rules 2017 and inserted rule 86B to be effective from 01.01.2021 is arbitrary, unreasonable and violative of Article 14, 19(1)(g) and 300A of the Constitution of India and ultra vires the parent Act. As per Rule 86B the petitioner has been restrained from utilizing the amount available in its electronic credit ledger to discharge his liability towardsoutput tax in excess of ninety-nine percent, in case where the value of outward taxable supply other than exempt supply and zero-rated supply in a month exceeds fifty lakh rupees.

 To Read the full text of the Order CLICK HERE

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