Restrictions on use of amount available in electronic credit ledger
Rule 86B of the CGST Rules
Straight from CBIC
Official source, not a summary of a summary
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Amendment history
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Where the monthly taxable turnover (other than exempt and zero-rated supplies) exceeds fifty lakh rupees, at least one per cent of the output tax must be paid in cash. It does not apply where the proprietor, karta, director or partner has paid more than one lakh rupees of income tax in each of the last two years, or where the registered person has received a refund above one lakh rupees for exports or an inverted duty structure, or to a government department, PSU, local authority or statutory body.
What this means in practice
The parts that actually decide cases — the things a practitioner checks first.
The turnover test is the MONTHLY taxable turnover excluding exempt and zero-rated supplies, not the annual figure.
Check the exceptions before applying it: income tax above Rs 1 lakh in each of the last two years for the proprietor, karta, director or partner; a refund above Rs 1 lakh on exports or inverted duty; or a government body.
How this provision is built
The skeleton, clause by clause — useful when a notice cites a specific sub-clause.
The exact words of the law
2,274 characters, uneditedReproduced from the CBIC text. We explain it above — but you should always be able to read it yourself.
Read the full provision+
(a) the said person or the proprietor or karta or the managing director or any of its two partners, whole-time Directors, Members of Managing Committee of Associations or Board of Trustees, as the case may be, have paid more than one lakh rupees as income tax under the Income-tax Act, 1961(43 of 1961) in each of the last two financial years for which the time limit to file return of income under subsection
(1) of section 139 of the said Act has expired; or
(b) the registered person has received a refund amount of more than one lakh rupees in the preceding financial year on account of unutilised input tax credit under clause
(i) of first proviso of sub-section
(3) of section 54 ; or
(c) the registered person has received a refund amount of more than one lakh rupees in the preceding financial year on account of unutilised input tax credit under clause (ii) of first proviso of sub-section
(3) of section 54 ; or
(d) the registered person has discharged his liability towards output tax through the electronic cash ledger for an amount which is in excess of 1% of the total output tax liability, applied cumulatively, upto the said month in the current financial year; or
(e) the registered person is –
(i) Government Department; or (ii) a Public Sector Undertaking; or (iii)a local authority; or (iv) a statutory body: Provided further that the Commissioner or an officer authorised by him in this behalf may remove the said restriction after such verifications and such safeguards as he may deem fit.] 2 [
(f) the registered person other than a manufacturer shall be exempted from the provisions of this rule only in respect of goods specified under rule 31D, on which the tax has been paid by the supplier on the basis of retail sale price:]
What changed, and when
The amendment trail, newest first — because the version that applies to your case depends on the period.
2026-02-01 · Inserted
20/2025-CTdated
Inserted (w.e.f. 01.02.2026) vide Notification No. 20/2025 – CT dated 31.12.2025.
2021-01-01 · Inserted
94/2020-CTdated
Inserted (w.e.f. 01.01.2021) vide Notification No. 94/2020 – CT dated 22.12.2020.
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Where this comes from
Text reproduced from the Central Board of Indirect Taxes and Customs, as available on 2026-09-05. The explanation and practice notes above are GSTZone’s own, written for this hub. If you spot anything out of date, tell us and we’ll fix it — this hub is checked daily against CBIC.
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