Rule 86B of the Central Goods and Services Tax Rules, 2017 has been introduced w.e.f. 1st January 2021 vide Notification No. 94/2020 - Central Tax which allows utilization of ITC upto 99% of the output tax liability.
The remaining 1% is required to be paid in cash. This new condition for utilization of ITC is subject to certain exceptions to exporters, supplier of goods of Inverted Duty Structure, taxpayers having footprints in the Income Tax database, etc.
The introduction initially was highly criticized by the taxpayers and practitioners and in response to that the CBIC issued a clarification providing that this new restriction would expect to impact only 0.5% of the total taxpayer base of 1.2 Crores.
In such manner, a Writ request has been documented before the Hon'ble Gujarat High Court testing the established legitimacy of Rule 86B. The Gujarat High Court has told the Government.