Supreme Court says no to Negative Blocking

Rule 86A of the CGST Rules authorizes tax authorities to restrict Input Tax Credit (ITC) in a taxpayer’s electronic credit ledger if there is a belief that the credit is fraudulently claimed or ineligible. This preventive measure, valid for up to one year unless restored earlier, necessitates proper documentation of reasons and is subject to judicial review to prevent arbitrary actions. Interestingly, the Revenue attempted to block the Electronic Credit ledger for an amount exceeding the actual credit, leading to the notion of negative blocking of ITC. Both the Delhi High Court and the Supreme Court have strongly criticized the Revenue for this practice. The Hon’ble Supreme Court rejected the Revenue's Special Leave Petition against the Delhi High Court's ruling in favor of the petitioner, directing the Revenue to refrain from negative blocking. J the App by JustIDT is delighted to share the snapshot as to why the revenue cannot have a over reach over every issue