Rule 86 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Rule 86 of the Central Goods and Services Tax Rules, 2017 says how the electronic credit ledger is kept: in FORM GST PMT-02 for each registered person eligible for input tax credit, with every claim of input tax credit credited to it and debits only as the rule allows. It also covers the debit for a refund claim, re-credit when the refund is rejected (FORM GST PMT-03), re-credit of erroneous refund deposited back (FORM GST PMT-03A) and discrepancies (FORM GST PMT-04).
This article follows the CGST Rules, 2017 as amended up to 31 October 2025 in the compilation consulted; notifications issued after that date should be checked.
The ledger is kept in FORM GST PMT-02; every claim of input tax credit is credited to it. It is debited to the extent of discharge of a liability under section 49, section 49A or section 49B, and to the extent of a refund claimed under section 54. A rejected refund is re-credited by the proper officer in FORM GST PMT-03. No entry may be made directly except as the Chapter provides.
The section behind the rule
Rule 86 serves the electronic credit ledger under section 49 of the CGST Act, 2017: see section 49 to 53: payment and electronic ledgers and electronic ledgers under section 49 and the PMT forms. This rule keeps the ledger. Two rules that restrict the use of the ledger are separate and already covered: rule 86A on blocking the electronic credit ledger and rule 86B on the cash payment restriction. For a review of how your credit is reflected in the ledger against what your returns claim, see our ITC reconciliation advisory.
Rule 86(1): the ledger and the credit
"The electronic credit ledger shall be maintained in FORM GST PMT-02 for each registered person eligible for input tax credit under the Act on the common portal and every claim of input tax credit under the Act shall be credited to the said ledger."
The ledger is for each registered person eligible for input tax credit, and every claim of credit under the Act is credited to it.
Rule 86(2): debit for discharge of liability
The ledger "shall be debited to the extent of discharge of any liability in accordance with the provisions of section 49 or section 49A or section 49B". The words "or section 49A or section 49B" were inserted by Notification No. 03/2019-Central Tax dated 29.01.2019 with effect from 01.02.2019, as the footnote records. The matching credit in the electronic liability register is in rule 85.
Rule 86(3) and (4): refund of unutilised credit
- Sub-rule (3). Where a registered person has claimed refund of any unutilized amount from the electronic credit ledger in accordance with section 54, "the amount to the extent of the claim shall be debited in the said ledger".
- Sub-rule (4). If the refund so filed is rejected, either fully or partly, the amount debited under sub-rule (3), to the extent of rejection, "shall be re-credited to the electronic credit ledger by the proper officer by an order made in FORM GST PMT-03".
Rule 86(4A): refund of tax wrongly paid or paid in excess
Sub-rule (4A), inserted by Notification No. 16/2020-Central Tax dated 23.03.2020 (as the footnote records), applies where a registered person has claimed refund of any amount paid as tax wrongly paid or paid in excess for which debit has been made from the electronic credit ledger. The amount, "if found admissible, shall be re-credited to the electronic credit ledger by the proper officer by an order made in FORM GST PMT-03".
Rule 86(4B): erroneous refund deposited back
Sub-rule (4B), inserted by Notification No. 14/2022-Central Tax dated 05.07.2022, applies where a registered person deposits the amount of erroneous refund sanctioned to him:
- (a) under sub-section (3) of section 54 of the Act, or
- (b) under sub-rule (3) of rule 96,
along with interest and penalty, wherever applicable, through FORM GST DRC-03, by debiting the electronic cash ledger, on his own or on being pointed out. An amount equivalent to the amount of erroneous refund deposited "shall be re-credited to the electronic credit ledger by the proper officer by an order made in FORM GST PMT-03A". The footnote records that words in clause (b) were omitted by Notification No. 20/2024-Central Tax dated 08.10.2024; the clause now reads as printed above. For the recovery route in rule 96, see rule 96B: recovery where export proceeds are not realised.
Rule 86(5) and (6): no direct entries, and discrepancies
- Sub-rule (5). "Save as provided in the provisions of this Chapter, no entry shall be made directly in the electronic credit ledger under any circumstance."
- Sub-rule (6). A registered person who notices any discrepancy in his electronic credit ledger communicates it to the officer exercising jurisdiction in the matter through the common portal in FORM GST PMT-04. No period is printed.
The Explanation: when a refund is deemed rejected
"For the purposes of this rule, it is hereby clarified that a refund shall be deemed to be rejected, if the appeal is finally rejected or if the claimant gives an undertaking to the proper officer that he shall not file an appeal." This bears on sub-rules (3) and (4): the amount debited for the claim is re-credited to the extent of the rejection.
Movements in the credit ledger, side by side
| Event | Effect | Sub-rule | Form |
|---|---|---|---|
| Every claim of input tax credit under the Act | Credit | (1) | FORM GST PMT-02 (the ledger) |
| Discharge of a liability under section 49, 49A or 49B | Debit | (2) | Not named |
| Refund claimed of unutilised credit under section 54 | Debit to the extent of the claim | (3) | Not named |
| Refund rejected fully or partly | Re-credit by the proper officer | (4) | FORM GST PMT-03 |
| Tax wrongly paid or paid in excess refunded, if admissible | Re-credit | (4A) | FORM GST PMT-03 |
| Erroneous refund deposited with interest and penalty | Re-credit of equivalent amount | (4B) | FORM GST DRC-03 (deposit); FORM GST PMT-03A (order) |
| Discrepancy noticed | Reported to the officer | (6) | FORM GST PMT-04 |
Who does what, by when
| Who | What | Form | When |
|---|---|---|---|
| Registered person | Claims input tax credit | Return | Credited to the ledger as claimed |
| Proper officer | Re-credits on rejection of refund | FORM GST PMT-03 | After rejection; no period printed |
| Registered person | Deposits erroneous refund with interest and penalty, wherever applicable | FORM GST DRC-03 | On his own or on being pointed out |
| Proper officer | Re-credits equivalent amount | FORM GST PMT-03A | After the deposit; no period printed |
| Registered person | Reports a discrepancy | FORM GST PMT-04 | On noticing it |
A worked example
Sunrise Packaging, an invented registered person, has claimed input tax credit of three lakh rupees in its returns for the month; it is credited to its electronic credit ledger under rule 86(1) (all amounts here are assumed). It pays an output liability of two lakh rupees: the ledger is debited under rule 86(2). It then claims a refund of the unutilised balance of fifty thousand rupees under section 54; under rule 86(3) the ledger is debited with fifty thousand rupees. The refund is rejected as to twenty thousand rupees. Under rule 86(4), twenty thousand rupees is re-credited by the proper officer by an order in FORM GST PMT-03. Had Sunrise instead been sanctioned an erroneous refund and deposited it with interest and penalty through FORM GST DRC-03 by debiting its cash ledger, an equivalent amount would be re-credited under rule 86(4B) by an order in FORM GST PMT-03A.
Points to watch
- Which form re-credits. PMT-03 for rejected refunds and for admissible wrongly paid tax; PMT-03A for erroneous refund deposited back.
- Deemed rejection. The Explanation treats a final rejection on appeal, or an undertaking not to appeal, as rejection.
- Interest and penalty are not re-credited. Rule 86(4B) re-credits an amount equivalent to the erroneous refund deposited; the interest and penalty are paid from the cash ledger.
- No direct entries. Sub-rule (5) bars them except as the Chapter provides.
- Blocking and cash payment limits. Rules 86A and 86B are separate.
Need help reconciling your credit ledger?
If the credit shown in your ledger does not match what your books and your returns say, we trace the difference and help you report it correctly. See our ITC reconciliation advisory.
Key takeaways
- The electronic credit ledger is kept in FORM GST PMT-02; every claim of input tax credit is credited to it.
- It is debited for liability under sections 49, 49A and 49B and for a refund claim of unutilised credit.
- A rejected refund is re-credited by an order in FORM GST PMT-03; erroneous refund deposited back by an order in FORM GST PMT-03A.
- No entry may be made directly except as the Chapter provides.
- Discrepancies are reported in FORM GST PMT-04.
Read next
- Rule 85 of the CGST Rules, 2017: the electronic liability register
- Rules 87 and 88 of the CGST Rules, 2017: electronic cash ledger and identification number
- Rule 86A: blocking the electronic credit ledger
- Rule 86B: the cash payment restriction
Disclaimer: Based on the Central Goods and Services Tax Rules, 2017 and the GST Acts as amended up to 31 October 2025 in the compilation consulted, read with the Finance Act, 2026 where this article says so, as consulted on 2 October 2026. Notifications, circulars and amendments issued after that date, the forms on the common portal and the way the tax authorities apply these provisions should be checked. This article is general information, not legal advice; check the official text before acting.