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.

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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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4 Comments

  1. Dr G S Darbari says:

    If the receipient who is a registered dealer obtaind any material from a registered dealer with the GST number and makes the full payment of the material and GST to the supplier then the commissioner should take action against the registered supplier for not having deposited the tax amount rather than penalising the receipient by blocking the Input credit. As far as receipient is concerned it trusted the supplier at the dtrength of GST number and having paid the Full value of the invoice of the supplier including GST ,the recepient should not be penalised for having paid the GST amount to the supplier and obtained material from a GST registered supplier. In fact it is for the authorities to take action against the supplier, whom they have given the GST registration number, for not depositing the tax amount so collected from their customers(the receipients in this case).
    Blocking the ITC to Receipient at the fault of the GST registered supplier is unjustified and ITC should not be blocked due to this reason. Other reasons ,however, for blocking ITC are understandable.
    Wew hope the amendment will be done suitably. .

    1. G Venkatesh says:

      I don’t what the govt is really thinking, Why it is again and again punishing the recipient alone for the fault of the supplier. By giving powers to govt officials it will again create the under the table dealing and ultimately it will make the officials corrupt by means of bribe. https://taxguru.in/goods-and-service-tax/smes-requires-timely-action-gst-council-ministry-finance.html – kindly go through the article, i have mentioned some practical difficulties faced by SMEs as a Recipients & as Suppliers.

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