Introduction: Rule 86A was inserted vide notification no 75/2019 central tax dated 26-12-2019 w. e. f 26-12-2019 where under GST commissioner or other authorized officer by GST commissioner not below the rank of the assistant commissioner may restrict the debit of ITC ledger for utilization against payment of output tax liability. In other words, taxpayers have to pay GST in cash even if they have a sufficient amount of balance in their ITC credit ledger so hardship for the taxpayer in the GST regime. it was neither expected nor visualized at the time of drafting and implementation of GST.
When such provisions shall be applicable?
If the commissioner or authorized officer has reason to believe that Credit in ITC has been fraudulently availed, or credit of ITC is ineligible on account of
(1) Tax invoices or debit notes or any other documents of non-existent supplier or supplier is not conducting business from GST registered of business.
(2) ITC without receipt of goods or services –a mandatory condition under section 16 for availing ITC.
(3) ITC on invoice/ debit note/other documents but tax charged in respect of which has not been paid to the Government by the supplier- a mandatory condition under section 16 for availing ITC.
(4) Non-existent buyer: Registered person availing the credit of ITC has been found non-existent or not conducting business from a registered place of business.
(5) Buyer availing credit of ITC not in possession of a tax invoice or debit note or any other document prescribed under rule 36. A mandatory condition under section 16 for availing ITC.
Recording of satisfaction: after reasons to be recorded in writing, the commissioner or authorized officer not allow debit of an amount equivalent to such credit in electronic credit ledger for discharge of any liability under section 49 or a claim of any refund of any unutilized amount.
Such restriction shall cease to have effect after the expiry of a period of one year from the date of imposing such restriction.]
Effect of new rule 86A: Recently through RTI it was revealed that Government has blocks ITC of over Rs 6.14 Lakh Crores under Rule 86A: Details of RTI as under:
Sub Your RTI Application No. CBECE/R/T/21/01290 dated 31.02.2021 under RTI Act, 2005.
Concerning your above-mentioned RTI application received upon transfer from Shri Aman Mittal, CPIO/Deputy Commissioner, GST Policy Wing New Delhi on 13.09.2021, for SI. No. 1 to 4 of the above captioned RTI, point-wise response to information sought by you is as follows.
|Information sought by RTI Applicant||Information provided by CPIO|
|I.||Please specify state-wise numbers of taxpayers for whom Input Tax Credit has been blocked under rule 86A of CGST Rules 2017 as of 31.07.2021.||The information sought by RTI applicant at SI. No. 1 can be found in Annexure-1.|
|2.||Please specify the amount of Input Tax Credit blocked for all such taxpayers.||The amount of Input Tax Credit blocked from all such taxpayer are Rs. 6,14,010.81 Cr.|
|3||Please specify out of all the Input Tax Credit blocked under rule 86A of CGST Rules 2017, how much Input Tax Credit pertains to a period exceeding 1 year from the date of blocking of such Input Tax Credit.||
The amount of Input Tax Credit for a period exceeding 1 year from the date of blocking of such input tax credit blocked under rule 86A of CGST Rules, 2017 is Rs. 296311.45 Cr.
|4.||Please specify details of Taxpayers for whom Input Tax Credit has been unblocked after 1 year has been elapsed from the date of blocking of such Input Tax Credit.||The details of taxpayers for whom Input Tax Credit has been unblocking after 1 year has been elapsed from the date of blocking of such Input Tax credit are as follows
No. of GSTINs: 2228
Amount: Rs. 1370.71 Cr.
- In case you are dissatisfied with the information, you may file an appeal to First Appellate Authority Shri Dheeraj Rastogi Executive Vice President (Support), Goods and Services Tax Network, East Wing, 4th Floor, World Mark-1, Aerocity, New Delhi-110037.
Conclusion: huge revenue gain to the government on account of rule 86A.