Page 14 - Ch_10 ITC

05. Rule 86A:- Restrictions on utilisation of ITC available in Electronic Credit Ledger by Officer

CCP 10.05.21.00
“Rule 86A of the CGST Rules, 2017 provides that in certain specified circumstances, Commissioner on
the basis of reasonable belief may not allow debit of an amount equivalent to such credit in electronic
credit ledger.”
State the grounds (as guided by CBIC) on which the reasons for such belief must be based on.

[CA Inter May 23 Exam]
Answer :-
The reasons for such belief must be based on one or more of the following grounds:
i) ITC has been availed on basis of tax invoices or debit notes or any other valid documents prescribed

under rule 36:-
Ü issued by a registered person who has been found non-existent or not to be conducting any
business from the registered place of business or
Ü without receipt of goods or services or both or
Ü the tax in relation to which has not been paid to the Government.

ii) Registered person availing ITC has been found non-existent or not to be conducting any business
from the registered place of business or
iii) Registered person availing ITC is not in possession of tax invoice or debit note or any other valid

document prescribed under rule 36.

06. Rule 86B:- Restrictions on use of amount available in electronic credit ledger
CCP 09.06.22.00

Restrictions have been imposed on the use of amount available in electronic credit ledger vide rule 86B of
CGST Rules, 2017. Are there any exceptions to rule 86B? If yes, state the exceptions. [CA Inter RTP May
22] [Similar to CA Inter Nov 22 Exam]
Answer:-

The registered person shall not use the amount available in electronic credit ledger to discharge his liability
towards output tax in excess of 99% of such tax liability, in cases where the value of taxable supply other than
exempt supply and zero-rated supply, in a month exceeds `50 lakhs:
Yes, there are some exceptions to rule 86B that imposes restriction on use of amount available in electronic

credit ledger which are as under:-
a) Payment of Income Tax more than ₹ 1 lakh:-
Rule 86B may not apply, if below persons have deposited more than ` 1 lakh as income tax under Income-tax
Act, 1961 in each of the last 2 financial years for which time limit to file return of income u/s 139(1) of the said Act

has expired:-
† The registered person or
† The Karta/ proprietor/ managing director of the registered person;
† Any of the two partners, whole-time directors, members of Managing Committee of Associations or Board
of Trustees of the registered person, as the case may be.

b) Receipt of refund of input tax credit (ITC) of more than ₹ 1 lakh:-
Rule 86B may not apply, if registered person has received a refund of more than ` 1 lakh for unutilized ITC in
preceding financial year due to:-

† zero-rated supplies made without payment of tax or

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