Gujarat HC: Power of GST Officers to Block ITC to Avoid taxpayers Harassment

The harassment of the assessee should not be done by blocking the credit. This is the power of the GST council says Gujarat high court. The court commented that the rules and guidelines are to be followed through the GST council which should be issued by the government in the time of practicing the powers to block the usage of ITC through the enrolled assessee.

The Coram constituting Chief Justice Vikram Nath and Justice JB Pardiwala held with section 86A of the Central Goods and Services Tax Rules that permit GST council to block credit take from businesses which don’t have any physicality or via false medians.

Talking about the case from SS industries a Gujarat-based manufacturer of TMT bars which refuses the decision of the tax council to block the ITC usage with respect to particular invoices and the refusal of debit entries in the electronic credit ledger for FY 2016-17 and 2017-18.

On the grounds of the bogus cases, the tax counsel had alleged that the company has claimed the input tax credit A complete guide for understanding the basics of input tax credit and it calculation with detailed examples under GST (Goods and Services Tax) India which is provided by its vendors excluding any supply of the tax paid inputs. The company says that it has filed the tax returns on a regular note and has made settlements for supplies collected from the vendors. While the court has held the decision in favor of the GST council it mentioned that the powers cannot be wrongly used under Rule 86A.

Checking Input Tax Credit Frauds Under Rule 86A

from Dec. 26, 2019, the government has declared rule 86A will be activated and needs to be followed to avoid the cases concerning frauds of bogus invoices. It permits the GST commissioner to restrict the debit of the amount which is not liable or bogusly obtained tax credit in the electronic ledger. Only 1 year is a maximum period to which the restriction is imposed on the assessee.

The Commissioner Can Implement:

• The supplier provides the tax invoices or debit notes who have no physicality or have not implemented inside the businesses from the place for which it needs to take the enrolment
• The invoices are being issued excluding the receipt of goods and services Get to know GST provisions and rules on the free supply of goods. Also, we have included rules regarding ITC reversal on free supplies of goods and services
• ITC is claimed on the grounds of invoices or debit notes with respect to the supplies where no tax is to be given to the council
• if a business asks for credit that is non-existent or cannot show any tax invoice

Rule 86A May Be Disoriented as per the Gujarat HC

Sorting the latest judgments of the Supreme Court affirmed the requirement for checks and balances in the tax act, there might be a misuse to the Rule 86A in the absence of effective management handling as the high court has seen. Thus the below principles have been illustrated for the tax department:

• For reaching satisfactory results the tax council must lay on some of the reliable matters or details to practice on their powers to block the tax credit
• Beneath section 86A the powers are hilarious and extensive and thus should be used lightly
• These powers should not be imposed on the assessee as harassment or in a way where an irreversible and harmful impact on his business. The disappearance of the rules might have an effect
• The use of the credit is a fixed right of the assessee no rights get raised before claiming the credit