Negative Blocking of GST Credit Beyond Available Balance Is Illegal

The petitioner, a registered dealer under the Punjab GST Act, challenged repeated blocking of its Electronic Credit Ledger (ECL) under Rule 86A, whereby the GST authorities created a negative balance without prior notice and in excess of the Input Tax Credit actually available at the relevant time.

Main Issue: Whether Rule 86A permits blocking of the Electronic Credit Ledger beyond the ITC available, resulting in a negative balance.

HC Held: The Punjab and Haryana High Court allowed the writ petition, holding that Rule 86A can be invoked only to the extent of credit actually available in the ECL. Creation of a negative balance was held to be without jurisdiction and impermissible in law.

Relying on Shyam Sunder Strips, the Court set aside the impugned ECL blocking entries. The authorities were granted liberty to proceed in accordance with law under Sections 73 or 74 of the GST Act for recovery, if so advised.

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