The CBIC has come out with guidelines on blocking of tax credit by GST field officers, saying that such blocking should be on the basis of ‘material evidence’ and not just out of ‘suspicion’.
The guidelines laid down five specific circumstances in which such credit could be blocked by a senior tax officer. These include availment of credit without any invoice or any valid document, or availing of credit by purchasers on invoices on which GST has not been paid by sellers.
The Central Board of Indirect Taxes and Customs (CBIC) said the commissioner, or an officer authorised by him, not below the rank of assistant commissioner, must form an opinion for blocking of input tax credit (ITC) only after “proper application of mind” considering all the facts of the case.
“It is reiterated that the power of disallowing debit of amount from electronic credit ledger must not be exercised in a mechanical manner and careful examination of all the facts of the case is important to determine cases(s) fit for exercising power under rules 86A,” it said.
The government had introduced Rule 86A in GST rules in December 2019 giving powers to taxmen to block the ITC available in the electronic credit ledger of a taxpayer if the officer has “reasons to believe” that the ITC was availed fraudulently.
Till early last month, taxmen had blocked Rs 14,000 crore worth of input tax credit (ITC) of 66,000 businesses under this rule.
The CBIC in its guidelines dates November 2 said the remedy of disallowing debit of amount from electronic credit ledger being, by its nature, extraordinary, has to be resorted to with utmost circumspection and with maximum care and caution.
It contemplates an objective determination based on intelligent care and evaluation as distinguished from a purely subjective consideration of suspicion.
The reasons are to be on the basis of material evidence available or gathered in relation to fraudulent availment of input tax credit or ineligible input tax credit availed as per the conditions/grounds under sub-rule (1) of Rule 86A.
These guidelines have recommended monetary limits for the division of powers between commissions, joint commissioners, and assistant commissioners on blocking of the tax credit.
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.
AMRG & Associates Senior Partner Rajat Mohan said, “If these broad guidelines are followed by central as well as state tax officers in letter and spirit, these will surely reduce the litigation for honest taxpayers who are currently facing harassment at the hands of tax officers.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.