QUESTION

Provide the specimen (draft) regarding unblock of ITC and also provide reason for blocking of ITC

ANSWER

Facts of the case: Regarding blocking and unblocking of ITC.

Law applicable: Rule 86A Conditions of use of amount available in electronic credit ledger

(1) 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 in as much as-

a) the credit of input tax has been availed on the strength of tax invoices or debit notes or any other document prescribed under rule 36-
i. issued by a registered person who has been found non-existent or not to be conducting any business from any place for which registration has been obtained; or
ii. without receipt of goods or services or both; or
b) the credit of input tax has been availed on the strength of tax invoices or debit notes or any other document prescribed under rule 36 in respect of any supply, the tax charged in respect of which has not been paid to the Government; or
c) the registered person availing the credit of input tax has been found non-existent or not to be conducting any business from any place for which registration has been obtained; or
d) the registered person availing any credit of input tax is not in possession of a tax invoice or debit note or any other document prescribed under rule 36,

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 any liability under section 49 or for claim of any refund of any unutilised amount.

(2) The Commissioner, or the officer authorised by him under sub-rule (1) may, upon being satisfied that conditions for disallowing debit of electronic credit ledger as above, no longer exist, allow such debit.

Reply: As per Rule 86A of CGST Rules to avoid misuse of the ITC credit availed, Jurisdictional Tax Officer has power to block the ITC available in your Electronic Credit Ledger at his discretion and may ask for certain clarifications based on the returns/statements you have filed and have claimed ITC.

Therefore to prepare a guidance note for the reply, please share with us, a brief and correspondence with Department. (Reply dt. 15/07/2021)