Rule 86B: GST Registration Concerns: Various High Court Judgments

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Rule 86B was implemented to combat tax evasion, prevent fraudulent ITC claims, and ensure a minimum cash payment from large taxpayers. However, the GST Department is using this rule as a tool to suspend or cancel GST registrations wherever there is a violation. In my humble view, this is an extreme measure that goes against the spirit of ease of doing business. Sharing a few judgments that might be helpful to you. Please save/bookmark this for future use.

1. Delhi High Court 1.1 Ujjwal Garg (2024) 24 CENTAX 49 GST registration suspended for violation of Rule 86B cannot continue after deposit of required amount, as suspension has wide adverse ramifications for business and requires due consideration. ARR

1.2 Pankaj Mittal - (2025) 28 CENTAX 272 Assessee’s application for voluntary cancellation of GST registration was rejected on violation of Rule 86B. HELD: Assessee must respond to demands raised regarding excess ITC claimed and Rule 86B violations.

1.3 A.P. Enterprises (2024) 21 CENTAX 319 ARR: SCN was issued to petitioner-assessee proposing to cancel registration on ground that assessee had violated provisions of Rule 86B. HELD: SCN did not contain any details of allegations against assessee and merely referred to Rule. SCN was cryptic and cancellation of registration could not be based on such cryptic SCN.

1.4 Subhana Fashion (2024) 24 Centax 82 Non-payment of tax dues for three months is not prescribed ground for cancellation of GST registration under Section 29 of CGST Act or Rule 21 of CGST Rules, making such cancellation illegal. Note: Though this case is not directly linked to Rule 86B but in litigation we can take help of this.

2. Himachal Pradesh High Court 2.1 A.M. Enterprises (2024) 22 Centax 573 Cancellation of GST registration on pretext of violation of rule 86B was a disproportionate punishment imposed on petitioner and was liable to be interfered in exercise of power conferred on this Court under Article 226 of Constitution of India. ARR

3. Karnataka High Court 3.1 Mohammed Sadiq (2024) 22 Centax 535 ARR: Show cause notice was issued for cancellation of registration on ground of violation of rule 86B - However, details, particulars etc., as regards violation were conspicuously absent and had not been mentioned either in show cause notice or in impugned order.

HELD: Order cancelling registration was not sustainable when details, particulars, etc., as regards alleged violation of rule 86B were not mentioned either in show cause notice or in order; registration was to be restored. Thanks & Regards Abhishek Raja Ram 9810638155