Blocking Of ITC Ledger: The Havoc Of Rule 86A

The good and simple regime of GST is witnessing a great spur in cases involving fake invoicing to pass on fake Input Tax Credit (‘ITC'). To block utilization of such fake ITC, Rule 86A of the Central Goods and Services Tax Rules, 2017 was introduced in 2019 empowering the specified officers to block ITC ledger so that such amount is not available for utilization against output tax liability or for claiming refund.

Fake Input Tax Credit itself invites proceedings under Section 73/74 of the Central Goods and Services Tax Act, 2017 for the purposes of adjudication of liabilities arising therefrom. However, blocking of ledger under Rule 86A can take place even before conclusion of adjudication under Section 73/74. The effect of both, however, is the same, as action under Rule 86A disables utilization of ITC and adjudication under Section 73/74 creates liability to pay such ITC. While adjudication under Section 73/74 is subject to various checks and controls as envisaged