Page 30 - GSTL_6th August 2020_Vol 39_Part 1

J12 GST LAW TIMES [ Vol. 39

BLOCKING OF ELECTRONIC CREDIT
LEDGER
By
Rachit Kumar Agarwal
CHARTERED ACCOUNTANT

As per Rule 86(1) of CGST Rules, 2017 - The elec-
tronic credit ledger shall be maintained in FORM GST
PMT-02 for each registered person eligible for input tax
credit under the Act on the common portal and every
claim of input tax credit under the Act shall be credited to
the said ledger.
Blocking of the Credit Ledger as the words mean implies that input tax
credit accumulated in Electronic Credit Ledger has been blocked. In other words
the assessee is restrained from making payment of the output tax from the credit
of the input tax on goods and services to extent of the amount that has been
blocked. Power to block the Electronic Credit Ledger is contained in Rule 86A of
Central Goods and Services Tax Rules, 2017.
Rule 86A was inserted vide Notification No. 75/2019-C.T., dated
26-12-2019.
History leading to insertion of Rule 86A
Dispute relating to the blocking of the Credit Ledger came up for the first
time before the Hon’ble Gujarat High Court. In this case the Writ Applicant be-
ing Alfa Enterprise whose Credit Ledger was blocked for ` 6,63,51,380/-. Hon’ble
Court held that the blocking of the credit is not backed by any statutory provi-
sion and thereby respondents were directed to unlock the credit. This case was
decided on 1-10-2019 [2019 (31) G.S.T.L. 592 (Guj.)].
Soon after the decision of the Hon’ble High Court the CGST Rules were
amended by way of insertion of Rule 86A which empower the Proper Officer to
block the credit ledger.
Intent of insertion of Rule 86A of CGST Rules, 2017
Countrywide there was huge abuse of Invoice being made without the
actual supply of goods that helped the recipient the benefit of the credit of the
input tax not due to them. Hence with the objective to block such credit availed
by the fraudulent means the provision was inserted so that the person availing
such credit can be debarred from availing the credit by the way of blocking of
Electronic Credit Ledger.
Legislative competence of Rule 86A
Rule 86A of the CGST Rules, 2017 has been inserted by the exercise of the
power conferred under Section 164 of Central Goods and Services Tax Act, 2017
with the Central Government.
As per Clause 164 of Central Goods and Services Tax Bills, 2017 power
has been granted with the Central Government for carrying out the provisions of
the Act. In this case there is no enabling provisions in the CGST Act, 2017 which
allows for blocking the Electronic Credit Ledger. In our view Legislative Compe-
GST LAW TIMES  6th August 2020  30