Rule 86B GST 1% Cash Liability Restriction: Compliance & Exemption Rules
Rule 86B GST 1% Cash Liability Restriction: Compliance & Exemption Rules
Comprehensive guide for GST practitioners and CFOs on CGST Rule 86B credit ledger restrictions, 1% cash payment rules, statutory exemptions, and Tally Prime payment journals.
Who is this for: CGST Credit Restrictions
Quick Answer: What Is the Rule 86B 1% Cash Liability Restriction?
Rule 86B limits Input Tax Credit usage to a maximum of 99% of monthly output tax liability if monthly taxable sales exceed ₹50 Lakhs. The remaining 1% liability must be paid in cash via Electronic Cash Ledger, unless exempt (e.g. Income Tax > ₹1L paid, export refunds received).
- Applies on monthly taxable turnover > ₹50 Lakhs (excluding exempt & exports).
- Mandates minimum 1% output tax payment through Electronic Cash Ledger.
- Exempt if proprietor/partners paid > ₹1L Income Tax in previous 2 fiscal years.
- TallyPrime Statutory Payment (Alt+S) records regular cash challan entries for GSTR-3B.
1. Exemption Matrix under CGST Rule 86B
Exemption 1: Income Tax Payment Criteria
Proprietor/partners/directors paid > ₹1 Lakh income tax in each of preceding 2 financial years.
Exemption 2: GST Refund Recipients
Received > ₹1 Lakh GST refund in preceding FY due to unutilized export ITC or inverted duty structure.
Exemption 3: Cumulative Cash Paid Exceeds 1%
Cumulative cash tax payments in current FY already exceed 1% of total output tax liability to date.
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