Rule 86B under CGST Act

[gunda ashok kumar]

One of my client has set off output tax with 100% ITC department issued notice to pay 1% cash.As per the frequent questions any month limit Rs.50 lakhs is not crossed but the turnover is more than Rs.6 crores in a financial year Rule 86B does not need to be complied with.If the turnover is less than Rs.6 crores in a financial year but the taxable supplies for any month exceeds Rs. 5o lakhs the Rule 86B stands attracted. I request the experts please clarify the issue how to proceed in the matter regarding if cash payment is made 1% how to get ITC

AI Summary

Client Challenges Rule 86B Notice: 1% Cash Payment Demand Despite Full ITC Use for Monthly Supplies Over Rs. 50 Lakhs. A client faced a notice under Rule 86B of the CGST Act, requiring a 1% tax payment in cash despite using 100% Input Tax Credit (ITC) to offset output tax. The turnover exceeded Rs. 6 crores annually, yet the department's notice was based on monthly taxable supplies exceeding Rs. 50 lakhs. Experts advised that the rule applies when monthly turnover exceeds Rs. 50 lakhs, necessitating a 1% cash payment. Suggestions included paying through DRC-03 with interest and reclaiming excess in the next month's GSTR-3B. Clarifications were sought on whether the 1% applies separately to IGST, CGST, and SGST.