GST Rule 86A permits only blocking available input tax credit, not negative ledger balances or excess blocking.

Rule 86A of the GST Rules permits blocking of input tax credit only to the extent of credit actually available in the Electronic Credit Ledger, and only where the officer records reasons to believe that such credit was fraudulently availed or otherwise ineligible. The provision is preventive and temporary; it does not authorise creation of a negative balance or blocking beyond the ledger balance. Where credit is unavailable or already utilised, the rule cannot be used for recovery, which must proceed through the GST assessment, demand, cancellation, or attachment machinery. The High Court therefore held the negative blocking unsustainable and set it aside to that extent.

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Issues: Whether Rule 86A of the Goods and Services Tax Rules, 2017 permits the Commissioner or an authorised officer to block a taxpayer's Electronic Credit Ledger by an amount exceeding the credit available at the time of the order.

Analysis: Rule 86A is a restrictive and preventive provision that operates only when input tax credit is available in the Electronic Credit Ledger and the officer has reasons to believe, recorded in writing, that such credit has been fraudulently availed or is ineligible. The power under the rule is limited to disallowing debit of available credit for a temporary period and does not authorise creation of an artificial negative balance or permanent recovery through ledger entries. If credit is not available or has already been utilised, the rule cannot be invoked to block the ledger beyond the available amount. Recovery, if warranted, must be pursued through the statutory machinery for assessment, demand, cancellation, or attachment.

Conclusion: Rule 86A does not permit negative blocking of the Electronic Credit Ledger beyond the credit available at the time of the order. The impugned blocking action was unsustainable and was set aside to that extent, in favour of the assessee.

Final Conclusion: The writ petition succeeded on the core issue and the respondents were left to pursue lawful recovery remedies, if available, under the GST enactment.

Ratio Decidendi: The power under Rule 86A is exercisable only against input tax credit actually available in the Electronic Credit Ledger, and it does not extend to creating a negative balance or blocking credit in excess of the ledger balance.

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