The Central Board of Indirect Taxes and Customs (CBIC) issued guidelines to Goods and Services Tax (GST) field officers to block Input Tax Credit (ITC). The guidelines detailed that ITC blocking should be done based on material evidence and not just out of suspicion.
The guidelines also laid down five specific circumstances in which a senior tax officer could block ITC. These circumstances include availing of ITC without any invoice or any valid document or availing of credit by purchasers on invoices on which sellers have not paid GST.
The CBIC said that the commissioner, or an officer authorised by him, not below the rank of assistant commissioner, must form an opinion for blocking of input tax credit only after ‘proper application of mind’ considering facts of the case. The CBIC also reiterated that the officers must exercise the power of disallowing ITC carefully as it is important to determine cases under CGST Rule 86A.
The government had introduced CGST Rule 86A in December 2019, giving powers to officers to block the ITC available in the electronic credit ledger of a taxpayer if the officer has reasons to believe that the ITC was availed fraudulently. Till early October 2021, GST officers had blocked Rs 14,000 crore worth of ITC of Rs 66,000 businesses using CGST Rule 86A.
The CBIC said in its guidelines that the remedy of blocking ITC by its nature is extraordinary, and it has to be resorted to with utmost circumspection and with maximum care and caution.
The reasons are based on material evidence available or gathered concerning fraudulent availment of ITC or ineligible input tax credit availed as per the conditions/grounds under CGST Rule 86A. These guidelines have recommended monetary limits for dividing powers between commissions, joint commissioners, and assistant commissioners on blocking the tax credit.
The principal commissioner/commissioner can decide for blocking ITC above Rs 5 crore. An additional or joint commissioner can decide for ITC worth Rs 1 to 5 crore. The deputy or assistant commissioner rank officer can decide on blocking ITC less than Rs 1 crore. When central and state tax officers follow these guidelines, it will help reduce the litigation for honest taxpayers facing harassment.
For any clarifications/feedback on the topic, please contact the writer at dvsr.anjaneyulu@cleartax.in
DVSR Anjaneyulu known as AJ, is a Chartered Accountant by profession. Loves to listening to music & spending time with family and friends.
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