Blocked Input Tax Credit – Rule 86A

The main objective of introducing the ‘

Goods and Services Tax’ is a seamless flow of input tax credit at each stage. However, with the passing times, various fraudulent activities like issuance of invoices without actual supply, issuance of fake invoices, etc. have given rise to escape the revenue of the exchequer. To overcome the loophole, the Government introduced the new concept of the blocked input tax credit, vide insertion of rule 86A to the Central Goods and Services Tax Rules, 2017. The current article briefly covers the concept of a blocked input tax credit.

Provisions relating to blocking of the input tax credit

Provisions of

rule 86A of the Central Goods and Services Tax Rules, 2017 empower the Commissioner or any officer authorized by him (not below the rank of an Assistant Commissioner) to disallow the debit of an amount equal to the blocked input tax credit (listed below) in electronic credit ledger or disallow the refund claim of any unutilized credit if the below conditions are satisfied-

The Commissioner or the authorized officer has a reason to believe that the registered person has fraudulently or ineligibly availed by the registered person; and
The reasons for blocking of input tax credit are to be recorded in writing.

List of the blocked input tax credit

As per provisions of rule 86A of the Central Goods and Services Tax Rules, 2017, the blocking of the input tax credit is possible if the officer has a reason to believe that the input tax credit has been fraudulently availed / ineligible to avail based on the following reasons-

Particulars	Reasons for blocking of input tax credit
The input tax credit has been availed on the basis of tax invoices/ debit notes/ any other document as prescribed under rule 36.	Such tax invoices/ debit notes/ any other document is issued by a registered person who is found to be either non-existent or is not conducting business from any place for which registration is obtained.
Such tax invoices/ debit notes/ any other document is issued without actual receipt of goods or services or both.
The GST charged with respect of such tax invoice/ debit notes/ any other document is not paid to the credit of the Government.
The input tax credit has been availed by the registered person.	Such a registered person is found to be either non-existent or is not conducting business from any place for which registration is obtained.
Such a registered person is not in possession of tax invoice/ debit note/ any other document as prescribed under rule 36.

In case the Commissioner or the authorized officer believes the existence of any of the above circumstances, then, the Commissioner/ officer can disallow the debit of an amount equal to such fraudulent credit or refund, as the case may be.

Availability of blocked input tax credit

Under the following two circumstances, the blocked input tax credit will be available to the registered person-

The Commissioner or the officer is satisfied that the conditions for disallowing debit of electronic credit ledger don’t exist anymore.
The restriction shall cease to have effect after completion/ expiry of a period of one year from the date of imposing the restriction.

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Frequently Asked Questions

Common questions about Blocked Input Tax Credit Rule 86A.

The main objective of introducing the 'Goods and Services Tax' is to ensure a seamless flow of input tax credit at each stage of the supply chain.

Some of the fraudulent activities that led to the introduction of the blocked input tax credit concept include issuance of invoices without actual supply, issuance of fake invoices, etc., which resulted in the evasion of tax revenue.

The Commissioner or any officer authorized by him (not below the rank of an Assistant Commissioner) has the authority to disallow the debit of an amount equal to the blocked input tax credit or disallow the refund claim of any unutilized credit.

The Commissioner or authorized officer must have a reason to believe that the registered person has fraudulently or ineligibly availed the input tax credit, and the reasons for blocking must be recorded in writing.

The input tax credit can be blocked if the tax invoices, debit notes, or other documents are issued by a non-existent or non-operational registered person, if the invoices are issued without actual receipt of goods or services, or if the GST charged on such invoices is not paid to the government.

Yes, the blocked input tax credit can be availed by the registered person under two circumstances: if the Commissioner or officer is satisfied that the conditions for disallowing the debit no longer exist, or after the expiry of one year from the date of imposing the restriction.

The restriction on availing the blocked input tax credit remains in effect for a period of one year from the date of imposing the restriction, unless the Commissioner or officer is satisfied that the conditions for disallowing the debit no longer exist.

The purpose of introducing the blocked input tax credit concept is to overcome the loophole of fraudulent activities and evasion of tax revenue by disallowing the debit of input tax credit that has been fraudulently or ineligibly availed.

Yes, the officer authorized to block the input tax credit must not be below the rank of an Assistant Commissioner.

The reasons for blocking the input tax credit, such as the registered person fraudulently or ineligibly availing the input tax credit, must be recorded in writing by the Commissioner or authorized officer.