Blocking of ITC Ledger Without Providing PreDecisional Hearing—Validity of—CA. Satyadev Purohit

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The Tax Publishers GST--Electronic Credit Ledger Blocking of ITC Ledger Without Providing Pre-Decisional Hearing--Validity of CA. Satyadev Purohit The learned author seeks to analyse an issue as to whether blocking of Electronic Credit Ledger of the taxpayer without providing him a pre-decisional hearing is sustainable in law. The discussion is based on the relevant statutory provisions, CBEC's clarification and some judicial pronouncements of the Karnataka High Court. 1. Power of Commissioner to block input tax credit The provisions relating to eligibility and conditions for taking input tax credit are enshrined under section 16 of the Central Goods and Services Tax Act, 2017 (in short "the CGST Act"). As per sub-section (1) of section 16 of the CGST Act, every registered person shall, subject to such conditions and restrictions as may be prescribed[1] and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person. The use of the words "subject to such conditions and restrictions as may be prescribed" signifies that the taking and utilization of input tax credit shall be subject to the conditions and restrictions prescribed under the CGST Rules. In order to prevent utilization of input tax credit wrongly availed (i.e. without receipt of goods or services or both or on the basis of invoice or debit notes 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, Rule 86A was inserted under the Central Goods and Services Tax Rules, 2017 (in short "the CGST Rules") dealing with conditions for use of amount available in electronic credit ledger. As per sub-section (1) of section 86A of the CGST Rules, 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 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 SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

GST--Electronic Credit Ledger

Blocking of ITC Ledger Without Providing Pre-Decisional Hearing--Validity of

CA. Satyadev Purohit

The learned author seeks to analyse an issue as to whether blocking of Electronic Credit Ledger of the taxpayer without providing him a pre-decisional hearing is sustainable in law. The discussion is based on the relevant statutory provisions, CBEC's clarification and some judicial pronouncements of the Karnataka High Court.

1. Power of Commissioner to block input tax credit

The provisions relating to eligibility and conditions for taking input tax credit are enshrined under section 16 of the Central Goods and Services Tax Act, 2017 (in short "the CGST Act").

As per sub-section (1) of section 16 of the CGST Act, every registered person shall, subject to such conditions and restrictions as may be prescribed[1] and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person.

The use of the words "subject to such conditions and restrictions as may be prescribed" signifies that the taking and utilization of input tax credit shall be subject to the conditions and restrictions prescribed under the CGST Rules.

In order to prevent utilization of input tax credit wrongly availed (i.e. without receipt of goods or services or both or on the basis of invoice or debit notes 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, Rule 86A was inserted under the Central Goods and Services Tax Rules, 2017 (in short "the CGST Rules") dealing with conditions for use of amount available in electronic credit ledger.

As per sub-section (1) of section 86A of the CGST Rules, 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 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