The Department blocked the assessee’s Input Tax Credit under Rule 86A of the CGST Rules, 2017, which resulted in a negative balance in the Electronic Credit Ledger { [2026] 184 taxmann.com 570 (Punjab & Haryana)}
Facts
- Assessee was registered under the Central Goods and Services Tax Act, 2017 and was availing Input Tax Credit in its Electronic Credit Ledger.
- The Department exercised its powers under Rule 86A of the CGST Rules, 2017 and blocked the ITC on the ground of suspected irregular availment.
- While blocking the credit, the Department blocked an amount exceeding the ITC balance actually available in the ECL, which resulted in the Electronic Credit Ledger showing a negative balance.
- The assessee challenged this action before the Punjab and Haryana High Court, contending that the rule only allows blocking of the existing credit and not an amount beyond what is available.
Issue
Whether the Department can block Input Tax Credit under Rule 86A of the CGST Rules, 2017 beyond the credit available in the Electronic Credit Ledger, resulting in a negative balance in the ledger.
Held
- The High Court held that Rule 86A empowers the authorities only to block the ITC that is available in the Electronic Credit Ledger.
- The Department cannot block ITC in excess of the available balance, as doing so would artificially create a negative balance in the ECL, which is not contemplated under the GST law.
- Therefore, blocking ITC beyond the available credit is legally impermissible and such action of the Department was held to be unsustainable in law.
