Big Relief in GST I No Blocking of ITC if NIl Balance in Electronic Credit Ledger

I CA Satbir Singh

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No Blocking of ITC if Nil Balance in electronic credit ledger

Facts of the case

Whether GST authorities can block electronic credit ledger (ECL) under Rule 86-A when balance is nil ?

Taxpayer Contention

If any credit balance is available, then the authority may, for reasons to be recorded in writing, not allow the debit of amount equivalent to such credit.

However, there is no power of negative blocking for the credit to be availed in future.

Department

In fact, the rule is very clear and has consciously used ‘equivalent to such credit’ instead of the words ‘equivalent to such ‘available’ credit’ in the second part of the said rule the non-usage of word ‘available’ draws lot of significance. There is one more facet to the issue that is the words ‘equivalent to such credit in electronic credit ledger’ do not speak about balance as on date, it speaks about extent, therefore, the available balance in ledger on the day of recording reasons and passing order may be NIL, however, the same dwells into insignificance, more particularly when maintenance of Electronic Credit Ledger is a continuous exercise.

Decision of High Court

• Rule 86A allows proper officer to disallow debit from ECL for limited period of time and not to make debit entries in ECL
• Rule 86A is not framed to recover input tax credit fraudulently availed.
• If credit is fraudulently availed and utilised appropriate proceeding under Section 73 or 74 of Central Goods and Services Tax Act, 2017 can be initiated but not under Rule 86A
• Department has no power to negatively block credit to be availed in future.
• Rule 86A can be invoked only when amount of ITC is available in ECL
• Blocking of Electronic Credit Ledger under Rule 86-A and insertion of negative balance in ledger when no ITC was available is without jurisdiction and illegal;