Government vide notification No. 75/2019 dated 26.12.2019 inserted Rule 86A indicating conditions of use of amount available in Electronic Credit Ledger .
1. Rule 86A : Rule 86A has empowered the Department to impose restrictions on use of available Input Tax Credit of recipients in certain cases. The commissioner or an officer authorised by him , on his behalf , not below the rank of an Assistant Commissioner has powers to block credit under Rule 86A.
2. Cases where credit availed be considered as ineligible or fraudulently availed:- Power under Rule 86A is exercised by authorities if they have reason to believe that ITC is ineligible or has been fraudulently availed . ITC is said to have been availed fraudulently in following cases :-
(a) Supplier found non-existent or not conducting business from its registered place.
(b) Taxes not paid into the Government Treasury, i:e the supplier has not paid GST against prescribed documents on which recipient availed credit.
(c ) Recipient availed credit without receipts of goods or services.
(d) Recipient is not in possession of tax invoice , debit note or any other document prescribed under rule 36.
3. Procedure to restrict credit under Rule 86A:- The commissioner or officer authorized by him will record reasons in writing and block credit available to the recipient. As a result , recipient is not allow to utilize available credit for discharge of any liability under sec 49 or claim refund for unutilised amount in his Electronic Credit Ledger .
In case , recipient submit proof / documentary evidence and commissioner / officer satisfied that conditions for blocking credits are no longer exist , he can allow/ unblock input Tax Credit.
4. Period of restrictions The restriction on the utilization of credit under Rule 86A will ceases to effect after the expiry of a period of one year from the date of imposing such restrictions.
5. Unanswered questions/ Clarifications awaited Though , Rule 86A is applicable w.e.f 26.12.2019 , still there are number of unanswered questions for which clarification is awaited form the Government :-
(a) Whether the mechanism of blocking of credit will be on common portal or some other mechanism is worked out.
(b) How the drastic powers of blocking / unblocking credit with the authorities will be exercised.
(c ) What does it mean – restriction ceases to have effect after the expiry of one year . whether recipient will allow to take credit after one year even if he does not received goods / invoices etc .
As if now , recipient need to be alert while dealing with the suppliers.
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