Rule 86B of CGST Rules, Goods and Services Tax - GST

[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?

Posts / Replies

[Ganeshan Kalyani]

Sir, in my view, you may refer clause (d) of said rule 86B.

[Rajagopalan Ranganathan]

Sir,

As per the proviso to rule 86B the said restriction shall not apply where –

(a) the said person or the proprietor or Karta or the managing director or any of its two partners, whole-time Directors, Members of Managing Committee of Associations or Board of Trustees, as the case may be, have paid more than one lakh rupees as income tax under the Income-tax Act, 1961(43 of 1961) in each of the last two financial years for which the time limit to file the return of income under subsection (1) of section 139 of the said Act has expired;

Since the company is newly formed it would not have paid any income tax during the previous two years. Therefore if the income tax paid is less than 1 lakh the restriction prescribed is applicable

[Shilpi Jain]

Also the rule applies only if the taxable value in a month is more than rs. 50 lakhs