Block ITC only on basis of ‘material evidence’, CBIC tells GST officers

The government had introduced Rule 86A in GST rules in December 2019 giving powers to taxmen 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.

CBIC has released guidelines on blocking of tax credit by goods and services tax (GST) field officers, adding such action should be on the basis of ‘material evidence’ and not just out of ‘suspicion’.

The norms by the Central Board of Indirect Taxes and Customs (CBIC) lay down five specific circumstances in which such credit could be blocked by a senior tax officer. These include availment of credit without an invoice or a valid document, or availing of credit by purchasers on invoices on which GST has not been paid by sellers.

The CBIC said the commissioner, or an officer authorised by him, not below the rank of assistant commissioner, must form an opinion for blocking of ITC only after “proper application of mind” considering all the facts of the case. “It is reiterated that the power of disallowing debit of amount from electronic credit ledger must not be exercised in a mechanical manner and careful examination of all the facts of the case is important to determine cases(s) fit for exercising power under rules 86A,” it said.

The government had introduced Rule 86A in GST rules in December 2019 giving powers to taxmen 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 last month, taxmen had blocked Rs 14,000 crore worth of ITC of 66,000 businesses under this rule.

In its guidelines dated November 2, the CBIC said the remedy of disallowing debit of amount from electronic credit ledger being, by its nature, extraordinary, has to be resorted to with utmost circumspection and with maximum care and caution. It contemplates an objective determination based on intelligent care and evaluation as distinguished from a purely subjective consideration of suspicion.

WITH PTI

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