Rule 86A of the CGST Rules empowers the Commissioner to block input tax credit available in the electronic credit ledger if there are reasons to believe that the credit is fraudulently availed or ineligible. A blocked ITC restricts the taxpayer's ability to utilise credit for paying output tax, creating an immediate cash flow burden.
This article explains how to get ITC unblocked.
What Is Rule 86A?
Rule 86A(1) allows the Commissioner to block ITC where there are reasons to believe that:
- The credit was availed fraudulently.
- The credit is ineligible.
- The credit was availed without actual receipt of goods or services.
The blocking is done by marking the credit as unavailable in the electronic credit ledger.
The One-Year Limitation
The blocking under Rule 86A is valid for one year from the date of the order. After one year, the block automatically lapses unless extended by a fresh order.
How to Get ITC Unblocked
Step 1: Obtain the Blocking Order
Request a copy of the order from the jurisdictional officer or download it from the GST portal.
Step 2: File for Unblocking
The taxpayer can file an application with the Commissioner seeking unblocking. If the Commissioner is satisfied that the block is no longer necessary, the ITC is unblocked.
Step 3: Challenge the Block
If the block is arbitrary or without jurisdiction, challenge it before the High Court. The Madras High Court has held that Rule 86A blocking must comply with natural justice.
Step 4: Follow Up
Once unblocked, verify that the electronic credit ledger reflects the available ITC.
Common Grounds for Challenge
- No reasons recorded for the block.
- Block based on suspicion, not evidence.
- Block beyond one year without fresh order.
- Violation of natural justice.
Conclusion
A blocked ITC is a serious cash flow issue, but it is not permanent. The one-year limitation and judicial remedies provide relief. Our team acts fast to get ITC unblocked.
At Anuj Desai & Associates, we provide expert representation for Rule 86A ITC blocking matters. Our team files unblocking applications and challenges illegal blocks before the High Court.
For a confidential consultation, contact us at office@anujdesaiassociates.com or call 9619456656. Visit our website at https://anujdesaiassociates.com or connect with our founder on LinkedIn at linkedin.com/in/ca-anuj-desai-122547230.