Rule 86-A blocking of input tax credit fails where the electronic credit ledger has a negative balance and no available credit exists.

Rule 86-A of the CGST Rules permits blocking only of credit available in the electronic credit ledger, and its use depends on satisfaction of the prescribed preconditions, including formation of an opinion on fraudulently availed or ineligible credit. Where the ledger shows a negative balance, there is no available input tax credit to block. On those facts, the blocking action exceeded the scope of Rule 86-A and was invalid, and the negative balance was directed to be restored to the extent of Rs. 1.42 crores.

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Issues: Whether the blocking of input tax credit under Rule 86-A of the Central Goods and Services Tax Rules, 2017 could be sustained when the electronic credit ledger had a negative balance and the statutory preconditions for invocation of the power were not satisfied.

Analysis: The power under Rule 86-A is confined to blocking use of credit available in the electronic credit ledger, and its exercise depends on satisfaction of the prescribed conditions, including formation of the requisite opinion on fraudulently availed or ineligible credit. On the facts, the ledger reflected a negative balance, so there was no available credit to block. In those circumstances, the impugned blocking exceeded the scope of Rule 86-A and could not be sustained.

Conclusion: The blocking of input tax credit was invalid and the negative balance was directed to be restored to the extent of Rs. 1.42 crores.

Ratio Decidendi: Rule 86-A permits blocking only of credit available in the electronic credit ledger, and the power cannot be exercised where no such available credit exists.

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