Blocking of Electronic Credit Ledger under GST and the reach of future credits referred to a larger Bench.

Rule 86A of the CGST Rules, 2017 was examined on whether the Electronic Credit Ledger may be blocked only up to the credit available at the time of blocking or whether future credits may also be covered. The order also considered whether the legality of such blocking must be tested against the wider GST framework, including assessment and recovery provisions, return filing and registration consequences, and the alleged impact on the assessee's right to carry on business under Article 19(1)(g). Noting conflicting views on the scope of blocking, the Court referred the matter to a larger Bench for consideration.

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Issues: (i) Whether the Electronic Credit Ledger can be blocked only to the extent of the credit existing at the time of blocking, or whether future credits can also be blocked under the governing GST framework; (ii) whether the legality of blocking the Electronic Credit Ledger must be examined with reference to the assessment and recovery provisions under the GST law and the alleged impact on the assessee's right to carry on business.

Analysis: The order noticed conflicting views on the scope of blocking under Rule 86A of the Central Goods and Services Tax Rules, 2017, including whether only existing credit or also future credits may be covered. It also noticed the contention that the broader statutory scheme under the Central Goods and Services Tax Act, 2017, including the assessment and recovery provisions and the consequences for return filing and registration, had to be considered, particularly in light of the alleged effect on business operations and Article 19(1)(g) of the Constitution of India.

Outcome: The matters were referred to a larger Bench for consideration.

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