RULE 86B OF CGST ACT APPLICABLE ON COMPENSATION CESS (LEVIED ON CIGARRATE) I.E. 1% CASH PAYMENT

Reply—New Rule 86B shall be affected from 1st January 2021 wherein restriction has been placed on setting off more than 99% of tax liability from Input tax credit where the value of taxable supplies other than exempt supply and zero rated supply exceeds Rs. 50 lakhs in a month.  Few exceptions have been provided to these rules which are as follows:

• Where the taxpayer has paid Income Tax exceeding Rs. 1 lakh in two preceding financial year.
• Where taxpayer has received refund exceeding Rs. 1 lakhs u/s 54 of CGST Act 2017.
• Where taxpayer has used electronic cash ledger to pay off liability on outward supplies which cumulatively makes 1% of the total liability up to the said month.
• Where a person is a Government Department, Public Sector Undertaking (PSU), local authority or a statutory body.

As you do not fall under any of the above exceptions, payment of tax need to be made in accordance with rule 86b of CGST Rules. It is also applicable on compensation cess.