Rule 86B: The Most Ignored but Important GST Provision You Need to Know

RULE 86B-Restrictions on use of amount available in electronic credit ledger In cases where –

₹50 Lakh Threshold

Applies if monthly taxable supplies (excluding exempt/zero-rated) exceed ₹50 lakh.

99% ITC Utilization Cap

Maximum 99% of output tax liability can be paid using the electronic credit ledger.

1% Cash Payment Mandate

At least 1% of tax liability must be paid in cash

Exceptions to the 99% ITC Utilization Restriction:

High-Income Tax-Payers

Applies if the person or key individuals (e.g., proprietor, MD, partners) paid over ₹1 lakh as income tax in each of the last two financial years.

Refund Recipients

Applies for those receiving refunds exceeding ₹1 lakh in the preceding year for unutilized ITC under clause (i) and (ii) of first proviso Section 54(3).

Excess Cash Payment

Registered persons who paid more than 1% of cumulative output tax liability through the electronic cash ledger during the financial year.

Specific Entities

Government departments, PSUs, local authorities, and statutory bodies are exempt.