exception to rule 86B-Income tax paid in excess of Rs. 1 Lac in each of last 2 financial years

[SUSHIL BANSAL]

Dear experts,

Rule 86B of the CGST Rules, 2017 provides that the restriction on utilization of ITC shall not apply where:

'the registered person or the proprietor or karta or managing director or any of its partners, as the case may be, has paid more than Rs. 1,00,000 as income tax under the Income-tax Act, 1961 in each of the last two financial years for which the time limit to file return of income under section 139(1) has expired.'

from the above exceptions I have certain queries:

The exception talks about Income tax paid. Whether Income tax paid will sum of TDS, TCS, Advance tax, Self-assessment tax or it will be net of refund.

Further the exception talks about income tax paid in last 2 F.Y. for which the time limit to file return of income under section 139(1) has expired. Suppose We want to check exception for F.Y.2021-22, then for which 2 F.Y. we will check Income tax paid. whether it will be FY 2019-20 & 2020-21 or fy 2020-21 & 2021-22.

[Raam Srinivasan Swaminathan Kalpathi]

Dear Querist

Assuming for a moment the time for filing ITR of the RTP is 31st July 2022 under Income-tax Act, 1961 for FY 2021-22 then one has to verify the years IT Returns of FY 2019-20 and FY 2020-21 for compliance with Rule 86B whilst filing your R-1 and R-3B Returns from April to July 2022. From August 2022 R-1 and R-3B returns will have to be filed after ascertaining compliance post verification the IT Returns of FY 2020-21 and FY 2021-22 for compliance.

Please appreciate that the Rule talks about two financials for which the time limit u/s.139(1) has expired.

Again if the time limit for filing IT Returns is 30th Sep 2022 one has to realign the compliance in accordance. Thanks

[Shilpi Jain]

Pls apply the provisions when you are filing the returns i.e. GSTR-3B. At such time what are the FY for which the due date of 139(1) has expired, consider those.

This will apply only in cases where the value of taxable supply other than exempt supply and zero-rated supply, in a month exceeds fifty lakh rupees

AI Summary

GST ITC exception: income tax paid in the relevant prior years determines relief when filing GST returns. Rule 86B conditions ITC utilisation relief on the registered person having paid income tax above the specified threshold in each of the two financial years for which the time limit to file return of income under section 139(1) has expired. The operative compliance step is to verify, at the time of filing GSTR-1/GSTR-3B, the income-tax payments shown in the relevant ITRs for the two financial years whose 139(1) due dates have passed; the particular pair of years depends on the filing deadline applicable when the GST return is filed. The exception applies only where taxable supplies exceed the high-turnover threshold.