A new Rule 86B has been inserted into CGST Rules, 2017 vide Notification No. 94/2020-Central Tax Dated 22nd December 2020. After the introduction of this new rule, the restriction has been imposed on the use of electronic credit ledger. Now, the registered person will be able to use only 99% of the electronic credit ledger balance to discharge his liability towards outward tax. This implies that 1% of liability towards outward tax has to be paid in cash.
This rule is applicable to that taxpayer whose taxable supply other than exempt supply and zero-rated supply, in a month exceeds fifty lakh rupees. This limit is be checked with respect to each month for which the return is being filed. Therefore, in cases wherein turnover of taxable supply would be less than fifty lakh rupees then this restriction would not be applicable. If in the subsequent month, the turnover exceeds 50 Lakh, then restriction would have to be checked.
Provided that Rule 86B would not be applicable if a registered person falls in any of the following criteria:
The below-mentioned persons have paid more than one lakh rupees as an income tax under the Income-tax Act, 1961(43 of 1961)–
The eligibility check would be made 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.
Provided further that the Commissioner or an officer authorized by him on this behalf may remove the said restriction after such verifications and such safeguards as he may deem fit
The rule is effective from 1st January 2021.
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