Blocking of ITC with Nil BalanceValidity ofNarendra Kumar

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The Tax Publishers GST--Input Tax Credit Blocking of ITC with Nil Balance--Validity of Narendra Kumar The learned author seeks to examine a question as to whether order issued under rule 86A of the CGST Rules for blocking of electronic credit ledger having nil balance is sustainable in law. The decision is based on a Calcutta High Court decision in the case of Basanta Kumar Shaw v. Assistant Commissioner of Commercial Taxes, decided on 28-07-2022 1. Power of Commissioner to direct blocking of electronic credit ledger Rule 86A of the Central Goods and Services Tax Rules, 2017 (in short "the CGST Rules") deals with conditions of use of amount available in electronic credit ledger. As per sub-rule (1) of rule 86A, the Commissioner or an officer authorised by him in this behalf, not below the rank of an Assistant Commissioner, having reasons to believe that credit of input tax available in the electronic credit ledger (ECL) has been fraudulently availed or is ineligible in as much as -- (a) the credit of input tax has been availed on the strength of tax invoices or debit notes or any other document prescribed under rule 36 -- (i) issued by a registered person who has been found non-existent or not to be conducting any business from any place for which registration has been obtained; or (ii) without receipt of goods or services or both; or (b) the credit of input tax has been availed on the strength of tax invoices or debit notes or any other document prescribed under rule 36 in respect of any supply, the tax charged in respect of which has not been paid to the Government; or (c) the registered person availing the credit of input tax has been found non-existent or not to be conducting any business from any place for which registration has been obtained; or (d) the registered person availing any credit of input tax is not in possession of a tax invoice or debit note or any other document prescribed under rule 36, may, for reasons to be recorded in writing, not allow debit of an amount equivalent to such credit in electronic credit ledger for discharge of any liability under section 49 or for claim of any refund of any unutilised amount. As per sub-rule (2) of rule 86A, the Commissioner, or the officer authorised by him under sub-rule (1) may, upon being satisfied that conditions for disallowing debit of electronic credit ledger as above, no longer exist, allow such debit. As per sub-rule (3) of rule 86A, such restriction shall cease to have effect after the expiry of a period of one year from the date of imposing such restriction. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

GST--Input Tax Credit

Blocking of ITC with Nil Balance--Validity of

Narendra Kumar

The learned author seeks to examine a question as to whether order issued under rule 86A of the CGST Rules for blocking of electronic credit ledger having nil balance is sustainable in law. The decision is based on a Calcutta High Court decision in the case of Basanta Kumar Shaw v. Assistant Commissioner of Commercial Taxes, decided on 28-07-2022

1. Power of Commissioner to direct blocking of electronic credit ledger

Rule 86A of the Central Goods and Services Tax Rules, 2017 (in short "the CGST Rules") deals with conditions of use of amount available in electronic credit ledger.

As per sub-rule (1) of rule 86A, the Commissioner or an officer authorised by him in this behalf, not below the rank of an Assistant Commissioner, having reasons to believe that credit of input tax available in the electronic credit ledger (ECL) has been fraudulently availed or is ineligible in as much as --

(a) the credit of input tax has been availed on the strength of tax invoices or debit notes or any other document prescribed under rule 36 --

(i) issued by a registered person who has been found non-existent or not to be conducting any business from any place for which registration has been obtained; or

(ii) without receipt of goods or services or both; or

(b) the credit of input tax has been availed on the strength of tax invoices or debit notes or any other document prescribed under rule 36 in respect of any supply, the tax charged in respect of which has not been paid to the Government; or

(c) the registered person availing the credit of input tax has been found non-existent or not to be conducting any business from any place for which registration has been obtained; or

(d) the registered person availing any credit of input tax is not in possession of a tax invoice or debit note or any other document prescribed under rule 36,

may, for reasons to be recorded in writing, not allow debit of an amount equivalent to such credit in electronic credit ledger for discharge of any liability under section 49 or for claim of any refund of any unutilised amount.

As per sub-rule (2) of rule 86A, the Commissioner, or the officer authorised by him under sub-rule (1) may, upon being satisfied that conditions for disallowing debit of electronic credit ledger as above, no longer exist, allow such debit.

As per sub-rule (3) of rule 86A, such restriction shall cease to have effect after the expiry of a period of one year from the date of imposing such restriction.