Rule 86B of CGST

[Komal Agarwal]

A registered person is exempted from provision of Rule 86B if he has already paid more than Rs one lakh as income tax. This amount should have been paid in each of the two preceding financial years for which the time limit to file return of income under subsection section 139(1) of the said Act has expired

Mr X, a proprietorship concern is following Rule 86B and discharging his GST liability accordingly. He has filed his Income tax return and paid an Income Tax for FY 2022-23 (AY 2023-24) Rs 1.50 lac during September 2023. He has also filed the Income tax return for FY 2023-24 (AY 2024-25) and paid the Income tax of Rs 2.50 lac during September 2024. The due date for Income tax return filling were 31.10.2023 and 31.10.2024 for FY 2022-23 and FY 2023-24 respectively.

Query : From which month’s GST return the Rule 86B will not be applicable to Mr X.

[Shilpi Jain]

Rule 86B itself is found to be ultra vires by Himachal HC - AM Enterprises - 2024 (9) TMI 1485 - HIMACHAL PRADESH HIGH COURT

[DR.MARIAPPAN GOVINDARAJAN]

Yes.  The Himachal High Court held that in the opinion of the High Court, the cancellation of GST Registration on the pretext of violation of Rule 86B is a disproportionate punishment imposed on petitioner and is liable to be interfered in exercise of the power conferred on this Court under Article 226 of the Constitution of India.

Whether this amount to struck down of Rule 86B?

[Tarun Agarwalla]

ANS- GST return of Oct 2024. as the utilisation is done while filling GSTR-3B that is filed during Nov 2024, after the expiry of due date of return, 31.10.2024.

[Komal Agarwal]

Thanks Tarun Agarwalla Sir

AI Summary

Exemption under Rule 86B: prior-year income tax payments exclude the rule's application for the relevant GST period. Rule 86B exempts a registrant who paid requisite income tax in each of the two preceding financial years after the time to file returns has expired; the restriction on credit utilisation is removed for the GST period whose GSTR-3B is filed following expiry of the income-tax return due date, and a high court has remarked that cancelling registration for alleged Rule 86B breach is disproportionate and faces an ultra vires challenge.