Gujarat High Court has made it clear that electronic credit ledger of a GST assesee will automatically get unblocked at the end of one year, provided no fresh order has been passed. It also said that if the authority does not permit debit for GST assessee from electronic ledger after end of one year, they may be penalised for that.

The ruling appears to be astep forward for guidelines issued by Central Board of Indirect Taxes & Custom (CBIC) issued in November and related to debit of electronic credit ledger.

The issue in focus is Rule 86A of the Central Goods and Services Tax Rules, 2017. It provides prohibiting debit from an electronic credit ledger in case the credit of input tax available (ITC) has been fraudulently availed or is ineligible. The restriction will cease to have effect after the expiry of a period of one year from the date of imposing such restriction. In other words, upon expiry of one year from the date of restriction, the registered person would be able to debit input tax credit so disallowed, subject to any other action that may be taken against the registered person.

However, while hearing a matter filed by Ambika Creation, the bench noted the authority did not permit the petitioner to avail the input credit available in his ledger for about more than two and a half months after the statutory life of the order came to an end.

The bench said that the rule itself has provided that the Electronic Credit Ledger can be blocked for a period of one year. On expiry of a period of one year, it would automatically get unblocked. In fact, “it was the duty of the authority concerned to permit the assessee, i.e. the writ-applicant, to avail the input credit available in his ledger. Once the statutory period comes to an end, the authority has no further discretion in the matter, unless a fresh order is passed,” it said.

Terming the whole incidence as unfortunate, the bench said that even representation was filed in this regard but the authority thought fit not to pay heed to such representation. “We make it clear that next time if we come across such a case, then the concerned authority would be held personally liable for the loss which the assessee might have suffered during the interregnum period,” the bench said.

Ensuring uniformity

Earlier in November, CBIC came out with detailed guidelines for disallowing debit of electronic credit ledger. This happened after writ petitions were filed challenging the constitutional validity of Rule 86A in as much as it gives the blanket powers to the Tax Department. In light of this, few States (such as Kerala) had earlier issued the guidelines for blocking/unblocking of ITC. However, companies with multi-State operations were being subjected to different practices across different States. Now in order to ensure uniformity across the nation, the said circular is seen as an attempt to rule out the subjectivity in application of Rule 86A by the tax officers, and directs cautious use of the powers.

The circular also prescribed investigation and adjudication to be completed within the period of restriction, so that the due liability arising out of the same can be recovered from the aseesee and the purpose of disallowing debit from electronic credit ledger is achieved. However, there have been cases where even after end of one year, tax officials continued to disallow on one ground or other which create problem for working capital.

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