With increase in fraudulently claiming credit of Input Tax or claiming of ineligible credit by the taxpayers, government came with the new GST rule to cope up with this situation. The central government is now taking strict actions against the person availing wrong credit by way of bogus bills, bills without transfer of goods, fake built-up of business, invoice less goods, goods less invoice etc. The credit can be blocked which is ineligible or availed fraudulently as per the belief of commissioner. Through Notification No. 75/2019 dated 26.12.2019, Government inserted new Rule 86A in CGST Rules, 2017 with effect from 26/12/2019 to put restrictions or conditions on use of Input Tax Credit amount available in Electronic Credit Ledger.
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This rule gives 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 fraudulently ITC is availed by the taxpayer or ITC is ineligible.
Cases or conditions, where credit availed, considered as ineligible or availed fraudulently
- The supplier is not found or not conducting business from its registered place of business.
- Supplier had not paid taxes to government on respective input tax credit availed by taxpayer.
- Availed ITC without receipt of Goods and Services.
- The registered person availing any credit of input tax is not in possession of tax invoice or debit note or any other document prescribed in accordance with Rule 36 of CGST Rules, 2017. Rule 36 lays down documents requirements and conditions for claiming input tax credit.
In any of the above cases, the officer can block the credit available in e-ledger of taxpayer.
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How credit can be restricted under Rule 86A?
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.
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How credit can be unblocked under Rule 86A?
If a 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.
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Restriction Period
Commissioner or an officer authorised can put a restriction for maximum of one year on the input tax credit. After that such restriction shall cease to have effect. That means after one year, the blocked credit will get unblocked.
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What Is the work Of Commissioners?
All the commissioners will now have the facility to block/unblock Input Tax Credit availed by the taxpayer fraudulently by fake invoices or invoices without receipt of goods or services, etc. To implement this rule, all the commissioners are required to make a list, GSTIN- wise of fake credit availers and block their ITC under GST Rule 86A. However, if there are certain entities which are located outside their jurisdiction, they should forward a list of such availers along with GSTN No. to the local office of the Pr.ADG/ADG DGGI, with a request to block credit of such GSTN immediately.
List is furnished in the following format-
Some actions like this were required. Through this, the genuine taxpayers are allowed to do business using eligible tax credits without hassles.
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The author of above article is Punit Chaplot.
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