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Made Effective from 1st January, 2021
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The rule only applies to utilization of ITC and not availment of ITC.
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Applicability: Registered persons having taxable value of supply more than Rs. 50 Lakh in a month.
Restrictions Imposed:
The applicable registered persons cannot use ITC in excess of 99% of the output tax liability. Thus, it means that minimum 1% of the output tax liability shall be discharged in cash.
Exceptions to the Rule:
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If the persons mentioned below have paid Income Tax more than One Lakh rupees in each of the last two financial years
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The registered person.
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The proprietor, karta or the managing director of the registered person.
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Whole time directors or any other person as the case may be.
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The registered person under concern has received a refund of amount greater than Rs.1 lakh in the preceding financial year on account of export rated supplies made without payment of tax or where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies.
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If the registered person under concern has discharged his liability towards output tax by electronic cash ledger for an amount in excess of 1% cumulatively of the total output tax liability up to the said month in the current financial year.
The registered person is:
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Government Department
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Public Sector Undertaking
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Local Authority
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Statutory Authority
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