NEW RULE 86A –Blocking on ITC



NEW RULE 86A –Blocking on ITC


Government via notification No. 75/2019 dated 26.12.2019 has  inserted new Rule 86A indicating conditions of use of amount available in Electronic Credit Ledger

This rule grants power to department (commissioner or an officer authorised by him, on his behalf, not below the rank of an Assistant Commissioner ) to restrict the use of available Input Tax Credit (ITC) to a certain amount if he believes that ITC is fraudulently availed by the taxpayer or ITC is ineligible.

Cases where credit availed be considered as ineligible or 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.

Period of restriction:

Commissioner or authorized person can restrict the credit maximum period of one year. After the expiry of a period of one year restriction on the utilization of credit under Rule 86A will ceases to effect.

What is the Procedure for restriction on ITC?

The commissioner or authorised officer will give reasons in writing and block credit that will not be available to the taxpayer. In such case, taxpayer will not be allowed to utilize the said blocked credit for discharging any liability or claim refund of balance available ITC.

What is the procedure of unblocking of this ITC?

  1. After the expiry of one year imposition put by officer it is automatically get unblock.
  2. Taxpayer submit proof or evidences that true or eligible credit was availed and the said officer get satisfied, then after receiving all the required documents he can allow or unblock the ITC.