TaxTMI 
TaxTMI 
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?
Rule 86B of CGST Rules
20 Aug 2021 
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Restriction on input tax credit where income tax paid is below threshold, applies to newly formed companies with high turnover.
Rule 86B restricts utilisation of the electronic credit ledger for payment of output tax when income tax paid in each of the two preceding financial years is below the statutory threshold; the restriction applies only if monthly taxable supplies exceed the turnover threshold, and a proviso exempts persons who (or whose specified associates) have each paid income tax above the threshold in each of those two years. A newly formed company lacking the two year tax payment history falls within the restriction if its monthly taxable supplies exceed the turnover threshold. (AI Summary)
Rule 86B restricts utilisation of the electronic credit ledger for payment of output tax when income tax paid in each of the two preceding financial years is below the statutory threshold; the restriction applies only if monthly taxable supplies exceed the turnover threshold, and a proviso exempts persons who (or whose specified associates) have each paid income tax above the threshold in each of those two years. A newly formed company lacking the two year tax payment history falls within the restriction if its monthly taxable supplies exceed the turnover threshold. (AI Summary)