Whether non-payment to supplier can leading to blocking of ITC

Last updated: 14 January 2023

Save Share

Quick Summary

The Gujarat High Court ruled that blocking Input Tax Credit (ITC) under Rule 86A of the CGST Rules is a serious measure that should only be used when ITC is fraudulently availed or ineligible. The court found that simply not paying a supplier within 180 days, without allegations of fraud, is not sufficient grounds to block ITC. The court directed the revenue to unblock the ITC, stating that such actions must have legal authority and cannot extend beyond one year.

Court :
Delhi High Court

Brief :
The Commissioner or the authorized officer may, on his own or based on submission of the assessee may examine the matter afresh. After being satisfied that the ITC availed initially considered being fraudulently or ineligible, it is no more ineligible or wrongly availed. He may allow the use of the ITC, so disallowed/restricted, to the extent of eligibility. However, the reasons for allowing the debit of ECL, earlier disallowed, shall be duly recorded on file in writing before allowing debit of electronic credit ledger. Moreover, the restriction is only for one year and shall cease to have effect after the expiry of a period of one year from the date of imposing such restriction.

Citation :
Sunny Jain v. Union of India & others [Writ Petition (C) 6444/2022 � Delhi High Court]

Daily Limit Reached