CBIC asks GST officers to block ITC on basis of evidence, not suspicion

The Central Board of Indirect Taxes & Customs (CBIC) issued guidelines on blocking of GST tax credit by GST officers, saying that such blocking should be on the basis of ‘material evidence’ and not just out of ‘suspicion’. As per the guidelines laid down, credit could be blocked by a senior tax officer under five specific circumstances. Below are the Five Circumstances under which credit can be blocked:

a) The Input tax credit is availed by the registered person on the invoices or debit notes issued by a supplier, who is found to be non-existent or is found not to be conducting any business from the place declared in registration.

b) The Input tax credit is availed by the registered person on invoices or debit notes, without actually receiving any goods or services or both.

c) The Input tax credit is availed by the registered person on invoices or debit notes, the tax in respect of which has not been paid to the government.

d) The registered person claiming the input tax credit is found to be non-existent or is found not to be conducting, any business from the place declared in registration.

e) The credit is availed by the registered person without having any invoice or debit note or any other valid document for it.

As per the CBIC Guidelines The Commissioner or an officer duly authorized by him in this regard, not lower than the level of Assistant Commissioner, can block Input Tax Credit (ITC) if there are reasonable grounds to assume that an input tax credit available in the computerized credit ledger has been unlawfully obtained or is ineligible.

The officer should consider whether there are reasonable grounds to believe that the registered person’s input tax credit was obtained fraudulently or is ineligible, as described in sub-rule (1) of rule 86A, and whether disallowing such debit of the said person’s electronic credit ledger is necessary to prevent him from utilizing or passing on fraudulently obtained or ineligible input tax credit in order to protect the interests of the public. Before the concerned officer continues to disallow ITC from the stated person’s computerized credit ledger, such “reasons to believe” must be officially recorded in writing on file.

The amount disallowed for debit from electronic credit ledger should not be more than the amount of input tax credit which is believed to have been fraudulently availed or is ineligible, as per the conditions/ grounds mentioned in sub-rule (1) of rule 86A.

The Commissioner or the person authorized by the Commissioner, as the case may be, may examine the matter anew and, if satisfied that the input tax credit, initially considered to be fraudulently availed or ineligible as per conditions of sub-rule (1) of rule 86A, is no longer ineligible or wrongly availed, either partially or fully, may allow the use of the credit, so disallowed/restricted.

For blocking of ITC above Rs 5 crore, principal commissioner/ commissioner will take a decision. Where the monetary amount is in the range of Rs 1-5 crore, additional commissioner or joint commissioner will take a decision, while for those less than Rs 1 crore deputy commissioner/ assistant commissioner rank officer will take decision on ITC blocking.