Negative blocking is within the scope of provisions of Rule 86A of the CGST Rules

Last updated: 12 December 2024

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The Madras High Court has ruled that blocking Input Tax Credit (ITC) from an Electronic Credit Ledger (ECL), even when the balance is zero, is permissible under Rule 86A of the CGST Rules. The court clarified that the rule allows authorities to prevent the debit of an amount equivalent to fraudulently availed credit, regardless of its availability in the ECL at the exact moment of blocking. This means blocking can occur even if the credit has been utilised or if the ECL balance is nil, as the intention is to recover the wrongly claimed amount.

Court :
Madras High Court

Brief :
The Hon'ble Madras High Court in the case of Tvl. Shanthaguru Innovations Private Limited v. Commercial Tax Officer & Ors. [Writ Petition No. 29872 of 2024 dated November 28, 2024] dismissed the case and held that the negative blocking is well within the scope of provisions of Rule 86A of the Central Goods and Service Tax Rules, 2017 ("the CGST Rules"). The blocking of Input Tax Credit ("ITC") can be made to the extent of wrongful availment of credit, for which Rule 86A of the CGST Rules empowers State Authority not to allow debit of the amount equivalent to such wrongful availment of credit to the extent of available ECL at any point of time. Therefore, at the time of blocking, the availability of ITC in the ECL is immaterial.

Citation :
Writ Petition No. 29872 of 2024 dated November 28, 2024

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Judgement posted by

Bimal Jain

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FCA, FCS LLB with21 Yrs of Experience inTaxation Indirect and Direct: Education Qualification: B.Com (Hons) Chartered Accountants Company Secretary LLB Qualified SAP FI/CO Consultants Professional Membership: Chairmanof Indirect Tax Committee of PHD Chamber of Commerce Member of Indirec ... Read more

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