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06/10/2026

06/10/2026

*IMPORTANT GST UPDATE: UNDERSTANDING GST RULE 86B - RESTRICTION ON 100% ITC UTILISATION*

Dear Members,

Many taxpayers are getting notices and facing cash ledger payment issues due to Rule 86B. Here is the complete and simplified summary of the rule for your practical understanding.

*1. WHAT IS RULE 86B?*
This rule restricts the use of Input Tax Credit (ITC) for paying output tax liability. You cannot pay 100% tax from ITC if this rule applies to you.

*2. WHEN DOES RULE 86B APPLY?*
Rule 86B applies when:

- Value of taxable supplies (excluding exempt and zero-rated supplies) exceeds Rs. 50 Lakhs in a month.

Note: This limit is for taxable supplies only, not total turnover.

*3. CORE RULE - THE 99% AND 1% RULE*
If Rule 86B applies:

- Maximum ITC that can be utilized: 99% of Output Tax Liability
- Minimum Cash Payment Mandatory: 1% of Output Tax Liability must be paid in cash through Electronic Cash Ledger

This is applicable for that particular month only.

*4. PRACTICAL EXAMPLE*
Let’s understand with an example:

- Output Tax Liability for the month: Rs. 8,00,000
- ITC Available in Credit Ledger: Rs. 8,00,000

Under Rule 86B:
- Maximum ITC you can use: Rs. 7,92,000 (99%)
- Minimum Cash Payment Required: Rs. 8,000 (1%)

Even if you have full ITC, you must pay Rs. 8,000 in cash.

*5. KEY EXCEPTIONS - WHEN RULE 86B DOES NOT APPLY*

Rule 86B will not apply in the following 5 cases:

*Exception 1:* The registered person or Proprietor / Karta / Managing Director / Any of two Partners / Whole-time Directors have paid more than Rs. 1 Lakh as Income Tax in each of the last two Financial Years.

*Exception 2:* The registered person has received a refund of more than Rs. 1 Lakh in the preceding Financial Year on account of unutilised ITC under:
- Zero-rated supplies (Exports) without payment of tax, or
- Inverted duty structure

*Exception 3:* The registered person has already paid more than 1% of output tax liability in cash cumulatively till date in the current Financial Year.

*Exception 4:* The registered person is a Government Department, PSU, Local Authority or Statutory Body.

*Exception 5 (New w.e.f. 1st Feb 2026):* A registered person other than a manufacturer is exempt, only for specified goods covered under Rule 31D (specified goods where tax is paid by supplier on RSP basis), where tax has been paid by the supplier on the basis of RSP.

*6. ACCOUNTANT'S MONTHLY CHECKLIST FOR RULE 86B*

Follow this 4-step process every month:

- Step 1: Check if monthly taxable supplies are more than Rs. 50 Lakhs?
- Step 2: If Yes, check Rule 86B applicability
- Step 3: Test all 5 exceptions mentioned above
- Step 4: If no exception applies, calculate ITC utilisation at 99% and pay 1% in cash

*7. IMPORTANT POINTS TO REMEMBER*

- This rule applies to all registered persons except the exceptions.
- The 1% cash payment can be paid through Electronic Cash Ledger only.
- If you fail to comply, your GSTR-3B will not allow 100% ITC utilization.
- Keep proof of Income Tax payment and refund received for claiming exception.

Please share this with your team and clients to avoid interest and notices.

04/10/2026

*Rs. 20,000 PENALTY DELETED: DELHI ITAT GIVES RELIEF TO TAXPAYER FOR NON-COMPLIANCE WITH 142(1) NOTICES*

A tax notice was served. The taxpayer failed to respond.

_The Income Tax Department imposed a penalty of ₹10,000 each for AY 2019-20 and AY 2020-21 under Section 272A(1)(d) for non-compliance with notices issued under Section 142(1)._

The CIT(A) upheld the penalties.

But the taxpayer took the matter to the Delhi ITAT.

*Before the Tribunal, the taxpayer explained that the initial non-compliance occurred due to the non-availability of the counsel’s assistant. More importantly, he subsequently appeared before the Assessing Officer, filed the required replies and fully participated in the reassessment proceedings.*

The Tribunal took note of this subsequent conduct.

_It also noted that the Assessing Officer himself had recorded the taxpayer’s subsequent compliance and had completed the assessments under Section 147 read with Section 143(3), rather than under Section 144._

*The ITAT held that the explanation was plausible and that Section 272A(1)(d) is subject to Section 273B, which recognises reasonable cause as a basis for relief.*

On October 1, 2026, the Delhi ITAT deleted both penalties.

Total relief: ₹20,000.

The takeaway is simple:

A missed notice can trigger a penalty.

_But when there is reasonable cause and the taxpayer subsequently cooperates with the department and furnishes the required information, that conduct can matter._

Tax compliance is not only about responding on time.

It is also about taking corrective action when a lapse occurs.

02/10/2026

No more repetitive forms! 🛑 GST just simplified multi-state expansion!
If you are running a business with branches in different states or planning to scale nationwide, this new update is for you! 💼✈️

The GST Portal has officially enabled the Multi-State Registration feature. You can now apply for registrations across multiple States and Union Territories in one go using a single Master TRN.

Why is this a game-changer?
✅ No need to start from scratch for every state.
✅ Common details auto-populate across your applications.
✅ Saves hours of data entry and prevents clerical mistakes.

Note: This facility is currently live on the homepage for Normal Taxpayers

Double tap if this makes your business life easier, and share this with a fellow entrepreneur or CA who needs to see this today!

01/10/2026

: Common Mistakes Identified by *

A quick checklist for Tax Auditors.

30/09/2026

& — Dates After

30/09/2026

Can Bill to & Ship to addresses be shown in a Delivery Challan?

Under CGST Rules 2017, Rule 55(1), delivery challans must include consignor & consignee details (name, address, GSTIN).

In "Bill to Ship to" scenarios, mention both parties on the challan & select the transaction type in the e-way bill.

Bonus: Add any extra details as needed!

Conclusion: Yes, it's allowed!

APPLICABLE LAW:

Sub rule 1 of Rule 55 of CGST Rules 2017 states that:
"(1) For the purposes of
(a) supply of liquid gas where the quantity at the time of removal from the place of business of the supplier is not known,
(b) transportation of goods for job work,
(c) transportation of goods for reasons other than by way of supply, or
(d) such other supplies as may be notified by the Board,
the consigner may issue a delivery challan, serially numbered not exceeding sixteen characters, in one or multiple series, in lieu of invoice at the time of removal of goods for transportation, containing the following details, namely:-
(i) date and number of the delivery challan;
(ii) name, address and Goods and Services Tax Identification Number of the consigner, if registered;
(iii) name, address and Goods and Services Tax Identification Number or Unique Identity Number of the consignee, if registered;
(iv) Harmonised System of Nomenclature code and description of goods;
(v) quantity (provisional, where the exact quantity being supplied is not known);
(vi) taxable value;
(vii) tax rate and tax amount ' central tax, State tax, integrated tax, Union territory tax or cess, where the transportation is for supply to the consignee;
(viii) place of supply, in case of inter-State movement; and
(ix) signature".

29/09/2026

for and : Available Types*

29/09/2026

for and : Available Types*