Summary
- The introduction of Rule 86B under the CGST Rules, 2017, effective January 1, 2021, mandates that businesses with taxable supplies over ₹50 lakh must pay at least 1% of their output tax liability in cash.
- This rule aims to curb tax fraud by limiting Input Tax Credit (ITC) utilization to 99%, ensuring only genuine businesses benefit from ITC provisions.
- Exceptions exist for certain cases, including those who have paid over ₹1 lakh in income tax in the previous two years and government bodies.
- While Rule 86B targets fraudulent practices, it increases compliance burdens for large-scale businesses operating on low profit margins.
Join the discussion — sign up to comment, upvote, and save articles.