Commissioner of Commercial Taxes issued instructions for blocking of GST credits under Rule 86A
Commissioner of Commercial Taxes issued a Circular No. 8/2020(PP2/2305/2020) dated September 21, 2020, regarding the blocking of credits under Rule 86A.
The relevant portions of Rule 86A reads as:
“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 ……may, for reasons to be recorded in writing, not allow debit of an amount equivalent to such credit in electronic credit ledger for discharge of liability under Section 49 or for claim of any refund of any unutilized amount.”
Blocking of credits
- Zero balance in all heads of tax in credit ledger – If the taxpayer is functional, the blocking of amount equivalent to such credit can be resorted to as and when credit accumulates in his electronic credit ledger. If the taxpayer is not functional and with no credit balance, it is impossible to block future accumulated credits too.
- Insufficient balance in the relevant heads of credit ledger – First step would be to block the amount available as on the date of blocking and the balance amount has to be blocked as and when the credits start to accumulate in the credit ledger of the taxpayer.
- Nil balance or insufficient balance in the heads of tax to be blocked but credits are available in other heads – Blocking of amount equivalent to such credit lying in one tax head in lieu of another (to which such credit actually pertains to) may be resorted to. However, it is to be noted that blocking in heads in the credit ledger other than the heads for which such blocking is to be done, is subject to limitations imposed by the cross-utilization of ITC.
For a request to block CGST credit, the available credit in SGST head cannot be blocked and vice versa.
- Taking any other action, Section 74 – Blocking of credit under Rule 86A is an emergency measure to prevent the taxpayer from using fraudulent or wrong credits. However, this does not preclude or impede any other action that may be taken under other provisions of GST laws including provisional attachment of property, demand, and recovery, etc.