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The Petitioner's Electronic Credit Ledger had been blocked u/r. 86A of the CGST Rules on the allegation of wrong availment of credit. The exercise of the power of the said Rule to block the credit had been active as on 03 May 2020. Further, the same had been blocked as on 03 September 2021 as well. Aggrieved, the Petitioner preferred a Writ before the Karnataka HC seeking un-blocking of the credit ledger.
Referring to the Rule 86A(3) of the CGST Rules, the Karnataka HC observed that the period upto which the Credit Ledger can be blocked is one year and such restriction shall be ceased if continued beyond one year’s time. In the instant case, the Credit Ledger had been blocked beyond a period of one year. Therefore, the HC set-aside the blocking of the credit ledger of the Petitioner.
PSN Automotive Marketing Private Limited [Writ Petition No. 16727/2021]
Rule 86A had been inserted into the CGST Rules so as to empower the Revenue authorities to block credits for specified allegations, for a specific time period. However, the mis-use of the power had been apparent as the said Rule was being exercised beyond jurisdiction of specified conditions and beyond the time-period prescribed. Accordingly, in order to clarify the scope of Rule 86A and ensure judicious exercise of the Rule, the CBIC has recently issued a Guideline CBEC-20/16/05/2021-GST/1552 dated 02 November 2021. The said guideline categorically clarifies that restriction imposed u/r. 86A(1) shall cease to have effect after expiry of 1 year from the date of imposing such restriction. It is hoped that basis the said Guideline, the non-judicial exercise of Rule 86A can be kept in check.
The information provided in this update is intended for informational purposes only and does not constitute legal opinion or advice. Readers are requested to seek formal legal advice prior to acting upon any of the information provided herein. This update is not intended to address the circumstances of any particular individual or corporate body. There can be no assurance that the judicial/ quasi judicial authorities may not take a position contrary to the views mentioned hereinrra quis.
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