In the 38th council meeting the ITC available with assessee over and above the credit available in GSTR 2A was restricted to 10% of the credit present in GSTR 2A and now with insertion of rule 86A they have introduced a new restriction on usage of ITC.
Rule 86A has been inserted by notification 75/2019 Dt. 26.12.2019 wherein it has been said that if the commissioner or any of his authorized officer not below the rank of Assistant commissioner has reasons to believe then he might stop the assessee from using the credit available in electronic credit ledger.
Rule 86A starts with a heading which states Conditions for use of amount available in Electronic credit ledger. Thus it clearly says that these conditions needs to be fulfilled if one wishes to use the amount available in Electronic Credit ledger.
There are 4 conditions mentioned in this small rule which starts with giving the power to Commissioner or any officer appointed by him not below the level of Assistant Commissioner who have reason to believe that credit available in input ledger has been fraudulently availed or is ineligible because of following reasons:
- The ITC has been claimed based on the basis of invoice issued by a person who doesn’t exist or his business doesn’t exist or where no goods or service has been actually received. (i.e. Fake invoice/ accommodation entry)
- The supplier of the service has still not paid the tax to the government.
- If the recipient availing the credit is found to be not running a business from the place registered with the GST department.
- The recipient is not having the proper tax invoice or any other legitimate document based on which credit has been taken.
If any of the above conditions are fulfilled the officer won’t allow the use of such credit available in Electronic credit ledger and can also stop the refund if any claimed by assessee.
However there is a relief that the above restriction shall cease to exist after a period of 1 year from the date of restriction imposed by Commissioner but even if the restriction is lifted and commissioner doesn’t reverse his belief that you were right in taking the credit then your taking the credit would again be restricted by section 16.
Many experts are under fear that this rule is giving much higher powers to the Commissioner and that they might misuse it.
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