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Rule 31D goods: limited exception from 1 February 2026
Clause (f) of the first proviso to Rule 86B exempts a registered person other than a manufacturer only for specified Rule 31D goods on which the supplier has paid tax using the retail sale price. A mixed business must separate the qualifying goods' output tax from its other output tax. The monthly ₹50 lakh threshold still uses taxable supply excluding exempt and zero-rated supply.
Fictional example: taxable supply ₹80 lakh, total output tax ₹9 lakh, of which ₹3 lakh relates to qualifying goods with all three facts confirmed. For October 2026, the minimum cash component under this restriction is 1% × (₹9 lakh − ₹3 lakh) = ₹6,000. In January 2026 the new exception is unavailable, so the same inputs give ₹9,000. If none of the qualifying facts is evidenced, the amount remains ₹9,000.
This is the Rule 86B minimum, not total GST payable. Reverse-charge tax, insufficient ITC and other payment obligations can require additional cash. Retain invoice-level tax allocation and supplier evidence.
Sources: CBIC active Rule 86B, including amendment footnote 2; GST Council December 2025 newsletter, Notification 20/2025–Central Tax.
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Practical guide · India · 11 October 2026
Rule 86B calculation: 1% of output tax, not of turnover
Rule 86B restricts use of the electronic credit ledger for eligible registered persons when taxable supplies other than exempt and zero-rated supplies exceed ₹50 lakh in a month. The key figure is generally 1% of output tax liability, subject to specified exceptions.
What the law or process actually requires
Test the value of taxable supplies in the relevant month, excluding exempt and zero-rated supplies. ₹50 lakh is a strict “exceeds” condition.
Where the rule applies and no exception is met, not more than 99% of output tax liability may be discharged using the electronic credit ledger.
Apply the actual rule-specific tests: identified government bodies; prescribed income-tax paid by specified persons; qualifying earlier-year refunds; and cumulative cash-payment rule.
Do not use this tool to determine the underlying GST rate, ITC eligibility, return liability or any blocked-credit position.
Worked example: applying this to a real decision
Taxable supplies are ₹80 lakh and output GST is ₹9 lakh. If none of the stated exceptions applies, the rule requires at least ₹9,000 (1% of ₹9 lakh) of output tax to be discharged without using the credit ledger. A taxable-supply value of exactly ₹50 lakh does not itself meet the “exceeds ₹50 lakh” trigger. Interest, late fee and other liabilities require separate treatment.
Evidence before claiming an exception
For the specified income-tax exception, obtain tax-payment particulars for each relevant preceding financial year and test the identified person or proprietor, not an unrelated group company. For the refund exception, match the earlier financial year, statutory refund category and refund amounts to the filed GST record. For the cumulative-cash test, maintain a month-by-month register of output tax and discharge through the electronic cash ledger. Where a government-body exception is selected, identify the legal status of the registered person. An unsupported checkbox can turn an accurate arithmetic result into an incorrect legal answer. Keep the monthly taxable-supply worksheet excluding exempt and zero-rated supplies and reconcile output tax liability to GSTR-3B before acting.
Three mistakes that change the outcome
- The 1% figure applies to output tax, not the taxable turnover.
- An exception must be supported by evidence; a blank or assumed “yes” is unreliable.
- The calculator depends on a shared script: actual engine behaviour must be tested after deployment.
Frequently asked questions
Does ₹50 lakh of monthly taxable supply trigger Rule 86B?
The provision uses “exceeds ₹50 lakh”; exactly ₹50 lakh does not satisfy that test.
Does the rule force payment of 1% of turnover?
No. The restriction relates to how eligible output tax liability is discharged.
Official source: CBIC — CGST Rule 86B. The applicable statutory text, order or notified rule takes precedence over this explanatory example.
Understanding this page: facts, law and evidence
Provision and applicability
Rule 86B restricts use of the electronic credit ledger against output tax in covered months with taxable supply above ₹50 lakh, excluding exempt and zero-rated supply. The 1% floor applies to the output-tax liability, not 1% of turnover or a separate levy. Before applying it, identify the person, month, legal exclusions, payment history, tax-payment exceptions and any competent Commissioner approval. Test the CGST, SGST/UTGST and IGST cash-ledger effect against reconciled liability.
Worked Indian fact pattern
A wholesaler has ₹65 lakh eligible monthly taxable supplies and ₹9 lakh output tax. Without an exception the indicative minimum cash discharge is ₹9,000, subject to correct output-tax and account-level treatment. The fact that cash is available does not determine which heads may be offset.
Records to preserve and actions to take
Preserve outward return, 3B, electronic liability and credit ledgers, proof of income-tax/payment exceptions, refund orders and reasons for any Commissioner dispensation.
Exceptions, boundaries and current-law cautions
The five exception branches, including the annual cumulative 1% payment condition, are not interchangeable; an expected refund or verbal assurance is not documentary compliance.
Primary-source research trail
Verify the identified official material against the transaction date, latest amendments and applicable jurisdiction: CBIC — current Rule 86B and amendment history
GST Rule 86B: One Percent Cash Test — practical legal analysis
How the rule works and where the boundary lies
The published Rule 86B restriction is triggered by monthly taxable supplies excluding exempt and zero-rated supplies exceeding ₹50 lakh; where applicable, more than 99% of output-tax liability cannot be discharged from the electronic credit ledger. The rule also identifies exceptions including specified income-tax-payment, refunds, cumulative cash payment and certain government-body tests. Audit the legal identity of persons whose tax payments count; merely tick-marking an exception without evidence is insufficient.
Worked Indian business or consumer illustration
Monthly relevant taxable supplies are ₹60 lakh and output tax liability is ₹10.8 lakh. If restriction applies and no exception is established, the cash component under the 1% cap is illustratively at least ₹10,800. This is 1% of output tax liability, **not** 1% of ₹60 lakh supplies. The taxpayer may have additional cash liabilities unrelated to Rule 86B.
Documents and evidence to retain
Retain turnover bridge, output-tax calculation, ledger utilisation, past income-tax payments/refund orders where exception invoked, cumulative cash-payment computation and competent-authority relief order if applicable.
Common interpretation mistake
A calculator must separately handle the >₹50 lakh monthly threshold and all documented exceptions. Zero-rated receipts must not be folded into the Rule 86B taxable-supply trigger.
Official reference material
- https://cbic-gst.gov.in/pdf/18052021-CGST-Rules-2017-Part-A-Rules.pdf
- https://cbic-gst.gov.in/pdf/central-tax/notfctn-94-central-tax-english-2020.pdf
This explanation supports general understanding; the applicable law, notification, tax period, jurisdiction and individual facts determine the result. Refer to operative primary instruments and obtain professional advice before filing or taking a legal position.
Practical decision guide: GST Rule 86B 1% Cash Payment Applicability Calculator
For GST Rule 86B 1% Cash Payment Applicability Calculator, the decisive test begins with the actual transaction, applicable instrument and a dated evidence trail. The following application check makes the financial or compliance conclusion reproducible rather than treating a headline as sufficient.
When this question arises
Rule 86B imposes a minimum electronic-cash-ledger discharge condition for specified registered persons whose taxable-supply value exceeds the regulatory threshold, subject to specified exclusions.
Evidence to retain
Calculate the threshold from eligible outward taxable supplies and test statutory exceptions including income tax, refund and government-related conditions.
Worked Indian example (illustrative)
At ₹80 lakh outward taxable supplies, compute the rule’s applicability and statutory exemptions before considering a minimum electronic cash payment; do not impose 1% where a valid exception applies.
Limitation to check before acting
The 1% minimum cash component is not an additional GST rate and cannot be applied indiscriminately to exempt supplies.
Reproducible review sequence
- For GST Rule 86B 1% Cash Payment Applicability Calculator, identify the document or transaction that raises the issue: Rule 86B imposes a minimum electronic-cash-ledger discharge condition for specified registered persons whose taxable-supply value exceeds the regulatory threshold, subject to specified exclusions.
- For the GST Rule 86B 1% Cash Payment Applicability Calculator review, collect the original records: Calculate the threshold from eligible outward taxable supplies and test statutory exceptions including income tax, refund and government-related conditions.
- Independently recalculate the figures in the example, replacing illustrative inputs with real ledger or account data.
- Identify the decisive exception, commencement date or scope limit: The 1% minimum cash component is not an additional GST rate and cannot be applied indiscriminately to exempt supplies.
- Save the dated regulator release or law version with the working paper and check whether a later amendment supersedes it.
Primary references for this decision
The example for GST Rule 86B 1% Cash Payment Applicability Calculator is educational and illustrative only. Confirm the actual current rule, transaction evidence and any applicable professional or regulatory approval before acting.
Calculation method and assumptions
The model first tests monthly taxable supplies excluding exempt and zero-rated supplies against ₹50 lakh, then applies the exceptions you selected. A ticked exception is an input assumption; the calculator cannot establish its documentary eligibility.
When the restriction applies, minimum cash is 1% of the relevant output-tax liability, rather than 1% of turnover. The model subtracts only the evidenced qualifying Rule 31D output tax for an eligible period from February 2026.
Example: ₹80 lakh taxable supplies and ₹9 lakh output tax, with no exception or qualifying excluded tax, give a ₹9,000 minimum cash component.