Rule 86A- Draconian Provision of GST

Rule 86A- Draconian Provision of GST
Rule 86A in the CGST Rules vide notification No 75/2019 has been introduced w.e.f. 26.12.2019 to empower the revenue to impose additional condition/restriction on use of amount of input tax credit available in the electronic credit ledger. This rule has given powers to the Department to restrict the credit of any person in certain cases where there is reason to believe that ITC is availed fraudulently or is ineligible.
Rule 86A has empowered the Commissioner or an officer authorized by him in this behalf, not below the rank of an Assistant Commissioner to put a restriction for maximum of one year on the input tax credit available in the credit ledger of a person to the effect that it cannot be used for discharging the GST output liability u/s 49 or not to allow refund of the credit in some situations.
We are hereby reproducing Rule 86A for your ready reference-

“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.

(3) Such restriction shall cease to have effect after the expiry of a period of one year from the date of imposing such restriction.”.

For the following reasons, the department may restrict the use of input tax credit-

1.   Supplier found non-existent or not conducting any business from their any of the registered place: It has been availed on the basis of documents prescribed under Rule 36 i.e tax invoice, debit note etc issued by a registered supplier who has been found non-existent or not to be conducting any business from any place for which registration has been obtained.

2.   Non receipt of goods or services or both: It has been availed on the basis of documents prescribed under Rule 36 i.e. tax invoice, debit note etc without receipt of goods or services or both.

3.   Tax not paid into the Government treasury: The assessee has not filed the monthly returns i.e. GSTR 3B, tax has not been received by the government.

4.   Availing of credit without documents: 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.

This restriction of utilization of credit will automatically revoke after the expiry of 1 year from the date of imposing such restriction.
This provision is imposed by the government after happening of numerous cases of frauds in GST. Hope so it works in the favor of both assessee as well as government.
We hope the above is useful to you. This update is solely for educational purpose.
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Rule 86A- Draconian Provision of GST

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