GSTN blocks ITC of Rs.14,000 crore and not Rs.6.14 lakh crore

On Tuesday, the GST Network (GSTN) has tweeted that it has blocked Input Tax Credit (ITC) worth Rs.14,000 crore for 66,000 taxpayers. 

The GSTN responded to social media posts about a Right To Information (RTI) reply about the Rs.6.14 lakh crore of ITC getting blocked under the CGST Rule 86A. The GSTN replied that the figure was incorrectly referred to in the RTI reply. It also included the ITC value on data entries consisting of errors made by the taxpayers.

The GSTN further compared the extent of ITC blocked with the total ITC availed and utilised by taxpayers in a financial year. The figure of Rs.14,000 crore of ITC accounts for approximately 0.38% of the average ITC used by all the GST taxpayers during the financial year. 

An RTI application was filed on 31st August 2021 under the RTI Act, 2005 by a Fellow Chartered Accountant based in Raipur, CA Madhur Agarwal. He sought specific data points on blocking of input tax credit available for utilisation in electronic credit ledger of taxpayers under the CGST Rule 86A. 

Responding to the application, S Mohan, CPIO at the GSTN, provided the necessary information through a letter dated 5th October 2021. 

The first and second questions were on the state-wise break-up and the total of the ITC blocked under the CGST Rule 86A as of 31st July 2021, respectively. To these, the GSTN provided an annexure with the state-wise break-up and the total figure. 

Delhi topped the list of highest taxpayers whose ITC got blocked under this rule at 13,539. Additionally, Uttar Pradesh recorded the highest value of ITC blocked at Rs.5.82 lakh crore. The ITC blocked for all states cumulatively came up to Rs. 6.14 lakh crore. Later, this figure was negated by the GSTN through its tweet stating that the figure included blocking due to errors in data entries by taxpayers.

The third and fourth questions sought the value of ITC respectively blocked and unblocked, older by one year from the date of such blocking. To these, the GSTN responded with Rs.2.96 lakh crore and Rs.1,371 crore. On 12th October 2021, the GSTN took to Twitter to clarify the earlier RTI reply mistake. 

The government introduced Rule 86A by amending the CGST Rules, 2017, in December 2019 through notification number 75/2019. The grounds for blocking such ITC available for utilisation has to be on any conviction that the taxpayer has availed ITC fraudulently. Such blocking is valid up to one year from the date of such blocking. However, notice or any proceedings can be initiated against the taxpayer in the meantime. If a notice is issued, the ITC earlier blocked must be unblocked as a legal course will take over the issue. However, if notice was not issued during that one year, the ITC must be unconditionally unblocked. 

The issue that bothers taxpayers is that there is no proper monitoring of who blocked ITC and oversees and tracks the same. Further, Rule 86A has a wide ambit under the law. It needs clear implementation instructions, as directed by the Gujarat High Court in January 2021. The rule should not be used to harass the taxpayers, and investigations initiated must be completed promptly, the High Court opined in its judgement.

The GST paid on the purchase of goods or services is available for claim right away must be set off with the liability on sales on a self-assessment basis in the GST returns. The GST commissioner has the power to block input tax credit availed even before any legal action can be taken against such disputable ITC.

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For any clarifications/feedback on the topic, please contact the writer at annapoorna.m@cleartax.in