Page 39 - DTPA Journal December 21

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15 FAQs on Rule 86B Mandatory 1%

cash payment on output GST

CA Subham Khaitan

Rule 86B has undergone severe criticism from Rs. 6 crores in a financial year, will he also be
various stakeholders ever since the same has been required to comply with the said rule?
notified by the Government. It puts a restriction on the Ans. One does not need to cumulatively calculate the
amount which can be used from the electronic credit
taxable supplies by merging values of the earlier
ledger while making the payment of output taxes. month. One needs to only find the taxable supplies of
Through this article, the author purports to analyze the the current month to determine if it exceeds Rs. 50
provisions and its practical implications by answering lakhs. If yes, one needs to comply with this provision.
the most commonly asked questions relating to this
rule. Thereby if in any month, the limit of Rs. 50 lakhs is
not crossed but the turnover is more than Rs. 6 crores in
Q1. What does the rule 86B require of the a financial year, Rule 86B does not need to be
taxpayers? complied with. On the other hand, if the turnover is less
than Rs. 6 crores in a financial year but the taxable
Ans. It mandates cash payment of 1% of the output
tax liability on a monthly basis for the registered supplies for any month exceeds Rs. 50 lakhs, then Rule
persons who are covered by this rule. This payment of 86B stands attracted.
liability in cash would be required irrespective of the Q5. If a registered person has multiple kinds of
fact that there is an existing balance in the electronic supplies i.e. taxable, exempt, non-taxable and
credit ledger. exports, whether the limit of Rs. 50 lakhs should be
calculated cumulatively?
Q2. Will this limit of 1% cash payment be
calculated by including the reverse charge payments Ans. The value of all zero-rated supplies including
also? exports and supplies to SEZ will be excluded for
calculating the limit of Rs. 50 lakhs. Further, the
Ans. The limit of 1% is on the output tax liability only.
Reverse charge payments cannot be considered as exempted supplies (which also includes non-taxable
supplies) will also not be counted towards this Rs. 50
payment of output taxes. Thereby, the limit of 1% will
lakhs. Therefore, the limit of Rs. 50 lakhs will only be
exclude the portion of taxes which has been paid under
reverse charge. calculated by considering the taxable supplies.
For example, if in any month, taxable supplies are of
Q3. Which persons are required to comply with
this rule? Rs. 40 lakhs, exports of Rs. 20 lakhs and exempt
supplies of Rs. 10 lakhs, Rule 86B will not be attracted
Ans. Only registered persons who have taxable in that month.
supplies of more than Rs. 50 lakhs in a particular month
Q6. If a registered person has both taxable (say
(subject to certain exceptions) must comply with this
Rs. 60 lakhs in a month) and zero rated supplies
provision.
(Rs. 30 lakhs in a month), will the requirement of
Q4. If a registered person has a turnover of more 1% payment in cash be applicable on both kinds of
than Rs. 50 lakhs in a particular month but less than supplies?

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