Traders' body CAIT on Friday urged Finance Minister Nirmala Sitharaman to defer the implementation of Rule 86B in GST, whereby businesses with over Rs 50 lakh monthly turnover will have to pay at least 1 percent of their GST liability in cash, terming it a "counterproductive" measure that will increase the traders' compliance burden.

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The Central Board of Indirect Taxes and Customs has introduced Rule 86B in Goods and Services Tax (GST) which restricts the use of input tax credit for discharging GST liability to 99 percent.

However, this restriction will not apply where the managing director or any partner has paid more than Rs 1 lakh as income tax or the registered person has received a refund amount of over Rs 1 lakh in the preceding financial year on account of any unutilised input tax credit.

The Confederation of All India Traders (CAIT) in a letter to Sitharaman has drawn her attention towards Section 86B, saying that "it is a counter-productive step which will load the traders further with the burden of compliance and also much financial obligation".

The traders' body stated that it has "urged Sitharaman to defer implementation of Rule 86 B immediately which is scheduled to be implemented from January 1, 2021, and also extend the last date for filing GST and Income Tax Audit return from December 31 to March 31, 2021".

CAIT Secretary General Praveen Khandelwal said that in light of the current scenario when domestic trade is disturbed due to repercussions of COVID-19 and traders are fighting for the survival of the business, it is "strongly urged that the implementation of Rule 86 B may be deferred".

He observed that GST has again culminated into a "cobweb for traders and it is a general feeling that instead of a simple tax it is becoming a much-complicated tax system putting greater compliance burden on the traders".

"Unfettered and discretionary powers including cancellation of GST registration and power to arrest are vested to officials and its misappropriate use can't be ruled out," the traders' body claimed.