CONDITIONS ON USE OF BALANCE IN ELECTRONIC CREDIT LEDGER Once the assessee files his monthly GSTR 3B and take credit, he should not be happy that ITC has been credited to the electronic credit ledger and he can use it at any time. He should also know about the provisions which restricts the utilization of such credit which is lying in his Electronic Credit Ledger. Rule 86 of the CGST/SGST Rules, 2017 (hereinafter referred to as “Rules”) talks about the form and the manner in which electronic credit ledger is being maintained in the portal by the portal. Section 49 of the Act states that ITC balance can be used for payment of only tax portion and not for payment of interest or penalty or other dues – 49 (5) Section 49 A read with 49B of the Act, read with Rule 88A of the rules deals with the manner and order in which the balance in credit ledger can be utilized. And the list is not complete …………. Over and above all, the CGST/SGST nineth amendment Rules, 2019 dated 26.12.2019 inserted one more rule – Rule 86A dealing with Conditions on use of the amount available in the electronic credit ledger. This new rule gives authority to the Commissioner or an officer authorized by him not below the rank of Assistant Commissioner, may not allow the assessee to use the balance available in the electronic credit ledger if he has reason to believe that the credit so available has been fraudulently availed or is ineligible in as much as the tax invoices in his possession are issued by a dealer who is not in existence or the supplier has not paid the tax thereon to the Government by filing GSTR 3B or credit has been availed without actual receipt of the goods or the recipient of goods is not in possession of valid tax invoice. This has led to chaos among the dealers as few departmental off icers started using the powers conferred by the said rule and any doubt as to the genuineness of the ITC available in the electronic credit ledger, department has started issuing notices to the assessee disallowing him from using the ITC and thereby making the assessee to pay tax by cash mode. Once notice so issued the assessee cannot use the balance in credit ledger for a period of one year, and after expiry of one year department has to release the restriction if not proved that the ITC has been really availed fraudulently. Rule 86A gives the department huge powers where the officer has any reasonable belief that the ITC is ineligible with respect to certain assessee they are using these powers and sometimes even genuine assessees facing this heat and leading to harassment. Keeping in view the above practical difficulty the CBIC has come out with a Circular detailing guideline subject to which alone an officer can exercise the powers conferred under Rule 86A.
Circular No 20/16/05/2021 GST dated 2.11.2021 – Para 3.1.4 makes it abundantly clear 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 the cases fit for exercising the powers conferred under Rule 86A. This power must be exercised with utmost circumspection and with maximum care and caution. By this guidelines, the board has drawn a clear line that unless the off icer has material evidences regarding conditions prescribed under Rule 86A are in possession he cannot exercise the power of disallowing the assessee from using his ITC balance and therefore the assessee may demand for such evidences and it cannot be arbitrary. In the present situation, and keeping in view the practical problems being faced by the assessee and tax professionals, circulars like this are welcome and put some check and control on the officers to exercise their powers with utmost caution and discourage them taking arbitrary decisions. Tags: 86A, gst, ITC, learning
