Negative ITC Blocking Illegal as Rule 86A Covers Only Available Credit: Bombay HC

Hemang Bipin Varaiya Vs State of Maharashtra & Ors. (Bombay High Court) Summary: The Bombay High Court held that Rule 86A of the CGST/MGST Rules does not permit “negative blocking” of Input Tax Credit (ITC) where no sufficient balance exists in the Electronic Credit Ledger (ECL). The petitioner challenged the blocking of ITC amounting to Rs. 4.82 crore on the ground that the department created a negative balance despite inadequate credit being available in the ledger. The Court observed that Rule 86A of CGST Rules 2017 can be invoked only to the extent of credit actually available in t...