The Rule 86A of CGST Rules, 2017 provides that in certain circumstances, Commissioner or an officer authorised by him, on the basis of reasonable belief that credit of input tax available in the electronic credit ledger has been fraudulently availed or is ineligible, may not allow debit of an amount equivalent to such credit in electronic credit ledger. It empowers the Commissioner or its authorized officers to disallow debit of electronic credit ledger and block the credit on the basis of reasonable belief that credit of input tax available in the electronic credit ledger has been fraudulently availed or is ineligible.
The Hon’ble High Courts in some cases have emphasized the need for laying guidelines for invoking Rule 86A. Therefore, the CBIC has issued guidelines dated 2nd November, 2021 for disallowing of Electronic Credit Ledger (‘ECL’) under Rule 86A of the CGST Rules, to all the Principal Chief Commissioners, the Chief Commissioners, the Principal Commissioners, the Commissioners of Central Tax, the Principal Director General and the Director General.
Under these guidelines, it is mentioned that who is the proper authority for the purpose of Rule 86A. As per these guidelines, the Commissioner (including Principal Commissioner) is the proper officer for the purpose of exercising powers for disallowing the debit of amount from ECL of a registered person under rule 86A. However, Commissioner/ Principal Commissioner can also authorise any officer subordinate to him, not below the rank of Assistant Commissioner, to be the proper officer for exercising such power under rule 86A. It is advised that Commissioner/Principal Commissioner may authorize exercise of powers under rule 86A based on the following monetary limits as mentioned below:
| Total amount of ineligible or fraudulently availed input tax credit | Officer to disallow debit of amount from electronic credit ledger under rule 86A |
| Not Exceeding Rupees 1 crore | Deputy Commissioner/Assistant Commissioner |
| Above Rupees 1 crore but not exceeding Rs. 5 crores | Additional Commissioner/Joint Commissioner |
| Above Rs. 5 crores | Principal Commissioner/Commissioner |
The Additional Director General /Principal Additional Director General of DGGI can also exercise the powers assigned to the Commissioner under rule 86A. The monetary limits for authorization for exercise of powers under rule 86A to the officers of the rank of Assistant Director and above of DGGI by the Additional Director General /Principal Additional Director General may be same as mentioned for equivalent rank of officers in the table above.
Where during the course of Audit under section 65 or 66 of CGST Act, 2017 it is noticed that any input tax credit has been fraudulently availed or is ineligible as per the grounds mentioned in sub-rule (l) of rule 86A, which may require disallowing debit of electronic credit ledger under rule 86A, the concerned Commissioner/ Principal Commissioner of CGST Audit Commissionerate may refer the same to the jurisdictional CGST Commissioner for examination of the matter for exercise of power under rule 86A.
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