The Central Board of Indirect Taxes and Customs (CBIC) notified new Rule restricting the use of Input Tax Credit (ITC) for discharging the output tax liability.

The notification notified the Central Goods and Services Tax (Fourteenth Amendment) Rules, 2020, which seeks to amend the Central Goods and Services Tax Rules, 2017.

The CBIC has inserted Sub-rule 4A under Rule 8 which says that every application made under rule(4) shall be followed by biometric-based Aadhaar authentication and taking photograph or taking biometric information, photograph and verification of such other KYC documents, as notified, unless the applicant is exempted under sub-section (6D) of section 25, if he has opted not to get Aadhaar authentication done.

In case if the applicant is an individual or of such individuals in relation to the applicant as notified under sub-section (6C) of section 25 where the applicant is not an individual, along with the verification of the original copy of the documents uploaded with the application in FORM GST REG-01 at one of the Facilitation Centres notified by the Commissioner for the purpose of this sub-rule and the application shall be deemed to be complete only after completion of the process laid down under this sub- rule.

As per the notification in Rule 36(4), the CBIC has revised the  limit to 5% instead of earlier 10%. Mandatory payment of 1% from cash ledger if taxable supply exceeds 50 lakhs.

The CBIC notifie Rule 86B in respect of restrictions on use of amounts available in electronic credit ledger.

Rule 86B is applicable on the registered person whose value of taxable supply other than exempt supply and export, in a month exceeds Rs 50 lakhs limit to be checked for each month As per said Rule, taxpayers cannot use Input Tax Credit in excess of 99% of output tax liability.

However, Rule 86B shall not be applicable on registered person deposited more than Rs 1 lakh rupees as income tax under the Income-tax Act, 1961 in each of the last two financial years; registered person has received a refund more than Rs 1 lakh rupees in the preceding financial year on account of export under LuT or inverted tax structure; cumulatively upto the said month in the current financial year registered person has discharged his output tax liability in cash which is in excess of 1% of the total output tax liability and this rule not applicable on govt department, PSU, local authority.

It is noteworthy that the taxpayer has to track each month that cumulative discharge of output tax liability in cash in the current Financial Year is more than 1% upto filing of return.