Rule 86B of CGST Rules

[Kaustubh Karandikar]

As per Rule 86B of CGST Rules, if the income tax paid in the last 2 financial years is less than ₹ 1 Lac, such person can utilize only 99% of the output tax liability from credit ledger. Whether this rule is applicable for a company which is newly formed only in this financial year but had turnover in a month more than ₹ 50 Lacs but income tax paid is less than ₹ 1 Lac?

AI Summary

Rule 86B Limits New Company's Credit Ledger Use Due to Low Previous Income Tax Payments and High Turnover In a discussion about Rule 86B of the CGST Rules, a query was raised regarding its applicability to a newly formed company with a monthly turnover exceeding 50 lakhs but with income tax paid under 1 lakh. Respondents clarified that the rule limits the use of the credit ledger to 99% of the output tax liability if the income tax paid in the last two financial years is below 1 lakh. Since the company is new and hasn't paid income tax in previous years, the restriction applies. The rule also considers the monthly taxable value exceeding 50 lakhs.