{"id":27832,"date":"2024-11-19T14:26:55","date_gmt":"2024-11-19T08:56:55","guid":{"rendered":"https:\/\/carajput.com\/blog\/?p=27832"},"modified":"2025-10-07T23:12:31","modified_gmt":"2025-10-07T17:42:31","slug":"implications-rule-86b-in-cgst-rules-2017","status":"publish","type":"post","link":"https:\/\/carajput.com\/blog\/implications-rule-86b-in-cgst-rules-2017\/","title":{"rendered":"Implications Rule 86B in CGST Rules, 2017"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_58 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Page Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a0101ad40645\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #000000;color:#000000\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #000000;color:#000000\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a0101ad40645\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/carajput.com\/blog\/implications-rule-86b-in-cgst-rules-2017\/#Applicability_of_Rule_86B\" title=\"Applicability of Rule 86B: \">Applicability of Rule 86B: <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/carajput.com\/blog\/implications-rule-86b-in-cgst-rules-2017\/#Implication_of_Applicability_of_Rule_86B\" title=\"Implication of Applicability of Rule 86B:\">Implication of Applicability of Rule 86B:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/carajput.com\/blog\/implications-rule-86b-in-cgst-rules-2017\/#Exceptions_to_Rule_86B\" title=\" Exceptions to Rule 86B:\u00a0\"> Exceptions to Rule 86B:\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/carajput.com\/blog\/implications-rule-86b-in-cgst-rules-2017\/#Remittance_of_Tax_via_DRC-03\" title=\"Remittance of Tax via DRC-03:\">Remittance of Tax via DRC-03:<\/a><\/li><\/ul><\/nav><\/div>\n<p>&nbsp;<\/p>\n<figure id=\"attachment_17635\" aria-describedby=\"caption-attachment-17635\" style=\"width: 1110px\" class=\"wp-caption alignnone\"><img loading=\"lazy\" decoding=\"async\" class=\" wp-image-17635\" src=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/10\/Applicability-of-Rule-86B.jpg\" alt=\"Rule Rule-86B Applicability\" width=\"1110\" height=\"821\" srcset=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/10\/Applicability-of-Rule-86B.jpg 600w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/10\/Applicability-of-Rule-86B-300x222.jpg 300w\" sizes=\"(max-width: 1110px) 100vw, 1110px\" \/><figcaption id=\"caption-attachment-17635\" class=\"wp-caption-text\"><strong style=\"color: #000080; font-size: 16px;\">Implications Rule 86B in CGST Rules, 2017<\/strong><\/figcaption><\/figure>\n<p>Rule 86B, introduced by Notification No. 94\/2020 \u2013 Central Tax on December 22, 2020, effective from January 1, 2021, limits the use of Input Tax Credit for discharging output tax liability. Registered taxpayers with a monthly taxable turnover exceeding INR 50 lakh are required to pay at least 1% of their OTL in cash, overriding previous rules.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Applicability_of_Rule_86B\"><\/span><span style=\"color: #000080;\"><strong>Applicability of Rule 86B: <\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Applicable to businesses with taxable turnover exceeding \u20b950 lakh in a month. Exclusions: Turnover calculation excludes exempt and zero-rated supplies. Taxable Turnover Formula:<\/p>\n<p>Taxable\u00a0Turnover=Total\u00a0Turnover\u2212(ZeroRated\u00a0Supplies + Exempted\u00a0Turnover ) \\ text{Taxable Turnover} = \\text{Total Turnover} &#8211; (\\text{Zero-Rated Supplies} + \\text{Exempted Turnover})Taxable\u00a0Turnover=Total\u00a0Turnover\u2212(Zero-Rated\u00a0Supplies+Exempted\u00a0Turnover)<\/p>\n<p>Restrictions Imposed BY GST Law i.e ITC Utilization Cap: Only 99% of OTL can be discharged through Input Tax Credit. &amp; At least 1% of OTL must be paid via mandatory Cash payment or using the electronic cash ledger.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\" wp-image-11580\" src=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/01\/GST-Rule-86B-1024x974.jpg\" alt=\"www.carajput.com; GSTRRULE 86B\" width=\"1095\" height=\"1042\" srcset=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/01\/GST-Rule-86B-1024x974.jpg 1024w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/01\/GST-Rule-86B-1024x974-300x285.jpg 300w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/01\/GST-Rule-86B-1024x974-768x731.jpg 768w\" sizes=\"(max-width: 1095px) 100vw, 1095px\" \/><\/p>\n<p>&nbsp;<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Implication_of_Applicability_of_Rule_86B\"><\/span><span style=\"color: #000080;\"><strong>Implication of Applicability of Rule 86B:<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><img loading=\"lazy\" decoding=\"async\" class=\" wp-image-11576\" src=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/01\/download-41-1.jpg\" alt=\"www.carajput.com; GST RETURN- GST Rule 86B\" width=\"1060\" height=\"319\" srcset=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/01\/download-41-1.jpg 309w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/01\/download-41-1-300x90.jpg 300w\" sizes=\"(max-width: 1060px) 100vw, 1060px\" \/><\/p>\n<ul>\n<li>Genuine businesses with low margins may face cash flow challenges despite maintaining accurate records.<\/li>\n<li>Businesses must plan tax payments carefully to ensure sufficient cash liquidity. Genuine businesses with low margins may face cash flow challenges despite maintaining accurate records. Businesses must plan tax payments carefully to ensure sufficient cash liquidity.<\/li>\n<li>Rule 86B curbs fraudulent activities like fake invoicing and generating counterfeit ITC for discharging fake output tax liability. It discourages practices of artificially inflating turnovers for financial credibility.<\/li>\n<li>Micro and small-scale businesses remain unaffected, as the rule applies only to turnovers exceeding \u20b950 lakh\/month.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Exceptions_to_Rule_86B\"><\/span><span style=\"color: #000080;\"><strong> Exceptions to Rule 86B:\u00a0<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>In the following cases are exempted (exceptions to Rule 86B) from the 1% cash payment requirement.<\/p>\n<ul>\n<li>Income Tax Filers: If the registered person (or their key personnel, such as proprietors, directors, or partners) paid income tax exceeding INR 1 lakh in the previous financial year.<\/li>\n<li>Refund Recipients: Businesses that received a refund of \u20b91 lakh or more in the previous financial year for: Unutilized Input Tax Credit due to exports under LUT, or Inverted tax structure.<\/li>\n<li>Cash Payments in Past Financial Years: If output tax liability was discharged using electronic cash ledger exceeding 1% of total output tax liability in the current financial year. Government Entities i.e., Rule does not apply to local authorities, PSUs, statutory bodies, and government departments.<\/li>\n<li>Cash Payment and ITC Re-credit: The 1% output tax liability (OTL) paid in cash is eligible for ITC in subsequent periods, as it becomes part of the available ITC after payment. Businesses may face temporary cash outflows and subsequent adjustments, impacting working capital.<\/li>\n<\/ul>\n<ul>\n<li>Failure to meet the 1% cash payment requirement in time could lead to:\n<ul>\n<li>Interest on delayed cash payment under Section 50 of the CGST Act (18% per annum).<\/li>\n<li>Recredit of Input Tax Credit does not eliminate the interest liability on the unpaid cash component.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Remittance_of_Tax_via_DRC-03\"><\/span><span style=\"color: #000080;\"><strong>Remittance of Tax via DRC-03:<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>Use Form DRC-03 to voluntarily remit the required 1% cash component along with interest under Section 50 of the CGST Act. Taxpayers must be required to mention in the remarks column. The purpose of the remittance (e.g., compliance with Rule 86B). Details of excess remittance and intent to adjust it in the next month\u2019s GSTR-3B.<\/li>\n<li>Utilization of Excess Remittance: The excess remitted amount can be claimed as input Tax credit in next month\u2019s GSTR-3B, as it will reflect in the electronic credit ledger.<\/li>\n<li>Share a copy of the DRC-03 and relevant details with the GST department for transparency and to preempt any compliance queries.<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>&nbsp; Rule 86B, introduced by Notification No. 94\/2020 \u2013 Central Tax on December 22, 2020, effective from January 1, 2021, limits the use of Input Tax Credit for discharging output tax liability. Registered taxpayers with a monthly taxable turnover exceeding INR 50 lakh are required to pay at least 1% of their OTL in cash, &hellip;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[10020],"tags":[],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/27832"}],"collection":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/comments?post=27832"}],"version-history":[{"count":4,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/27832\/revisions"}],"predecessor-version":[{"id":30154,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/27832\/revisions\/30154"}],"wp:attachment":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/media?parent=27832"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/categories?post=27832"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/tags?post=27832"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}