New Circular of GST ITC Blocking & Unblocking Rule 86A by Govt

On the concern of unblocking the ITC, the Delhi government has issued the rules beneath GST on the expiry of one year from the blocking date. The officers have the authority to restrict the ITC beneath Rule 86A of the GST Rules, 2017 which the assessee claims fraudulently. Sub-rule (3) of the articulated Rule prescribes that the ITC restricted would cease to have the effect post to the expiry of the duration of one year from the blocking date in case no action has avail by officers. GSTN notifies a situation where an ITC amount of Rs.2037.31 crores has been blocked by Delhi State GST officers in about 6414 GSTINs that fall under Delhi State jurisdiction beyond a one-year period.

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• The high court of Haryana and Punjab printed the order in the case of Rajnandini Metal Ltd Vs Union of India and Others. The HC ordered that the GST ITC can be stopped under GST Rule 86A if there is reason to believe that the credit is fraudulent or ineligible. read order

Accordingly, GSTN has already informed that they are considering introducing the functionality of automatic unblocking of these ITCs, as described above, which could result in these ITCs becoming available for utilisation by taxpayers.

Read Also: Best Tips to Protect GST ITC After Draconian Changes 2022

Circular stated the thing that the majority of these assessees ITCs will restrict via proper officers on the grounds of some mismatches or investigation or non-existence or receipt of alert notices, and others through the other states or central jurisdiction council with respect to the assessee.

These cases must be directed to their logical conclusion in a specific time period. The case is investigated and the proper officers might quickly take the steps to reach a final conclusion. After that, the proper officer must either use these restricted credits with respect to the demands (DRC 07 under GST) given with respect to these assessees following the lawful provisions or when the examination is found that the conditions for restricting the ITC no more exits than the ITC must be unblocked.

It is given that the field visit for these GSTINs whose credit is blocked is to be conducted and for the case when the company is found non-existing then there would be the implementation of the suspension and cancellation of registration. Additionally, a show-cause notice (DRC-01) should also be sent to the registered person promising to create demand, if no response is received, or if it is not satisfied, by creating a demand (DRC-07). When acknowledge specifically, summary assessment beneath section 64 might be recognized. But the restricted ITC must be unblocked and used for the payment towards the demand.

Show cause notice (DRC-01) should be given asking to make a demand by disallowing the ITC to the extent if the assessee is found to exist, claimed in a bogus way or towards which the assessee is not qualified, keeping in view the provision of clause (a) to (d) of sub-rule ( I) of rule 86A. Hence, DRC 07 should be given, when no response or non-satisfactory reply is received, under provision and ultimately, the blocked ITC under GST must be unblocked and used for payment of the demand made through DRC-07.

Before ITC was blocked, some of the steps may be opted, so only the remaining steps must be taken now and the concern must be chosen to the logical conclusion as given above. Inside the mentioned cases, the proper officer must search whether the said company exists in the name of some other company (Same PAN).

If the assessee’s enrollment has been cancelled. In case the assessee, whose ITC has been restricted and whose enrollment has been cancelled then the first cause of cancellation must be discovered. In case the assessee was revoked for being non-existing/non-functioning, then the ITC claimed must be disallowed and blocked ITC be used after following the procedure said in I (a) above. For taxpayer was cancelled for reasons excluding the reason of non-existing/non-functioning, then the ITC, to the extent it is supposed to be claimed in a bogus way, must not be permitted and demand (DRC-07) must be made and ultimately the blocked ITC must be unblocked and used for the payment of the demand made via DRC 07, after following the procedure presented in 1(b) above.

As provided in 1(c) above, only the left steps must be taken now and the concern must opt to the logical conclusion. The process to be followed for using the restricted ITC post unblocking that with respect to the demand made via DRC-07 areas under when the assessee has already answered for the coming notices sent by the proper officer and the proper officer post investigating the answers, has arrived at the conclusion that the unblocking might no more need then these restricted credits must be unblocked immediately.