Conditions of use of amount available in electronic credit ledger
Rule 86A of the CGST Rules
Straight from CBIC
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Amendment history
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Blocking of credit: an officer not below Assistant Commissioner who has reasons to believe the credit was taken on a fake invoice, from a non-existent supplier, without receiving the goods or services, or where the tax was not paid, may block the electronic credit ledger. The block lapses after one year, and reasons must be recorded in writing before it is imposed.
What this means in practice
The parts that actually decide cases — the things a practitioner checks first.
Blocking is not recovery: it stops utilisation, it does not create a demand. A demand still has to be raised under section 73 or 74A.
It lapses automatically after one year, and cannot be re-imposed on the same material.
Reasons must be recorded before blocking, and courts have set aside blocks that merely recite the rule or that block more than the credit alleged to be ineligible.
A negative block – blocking more than the balance available – has been held impermissible by several High Courts.
Questions people actually ask
Real questions we get on this provision, answered straight.
Our credit ledger has been blocked. What do we do first?+
Ask for the recorded reasons in writing – they must exist before the block. Then check the amount: it cannot exceed the credit alleged to be ineligible, and blocking beyond the available balance has been held bad. The block lapses in a year, but if the business cannot wait, a writ on the reasons is the practical route.
How this provision is built
The skeleton, clause by clause — useful when a notice cites a specific sub-clause.
The exact words of the law
1,864 characters, uneditedReproduced from the CBIC text. We explain it above — but you should always be able to read it yourself.
Read the full provision+
(1) The Commissioner or an officer authorised by him in this behalf, not below the rank of an Assistant Commissioner, having reasons to believe that credit of input tax available in the electronic credit ledger has been fraudulently availed or is ineligible in as much as- a) the credit of input tax has been availed on the strength of tax invoices or debit notes or any other document prescribed under rule 36 – i. issued by a registered person who has been found non-existent or not to be conducting any business from any place for which registration has been obtained; or ii. without receipt of goods or services or both; or b) the credit of input tax has been availed on the strength of tax invoices or debit notes or any other document prescribed under rule 36 in respect of any supply, the tax charged in respect of which has not been paid to the Government; or c) the registered person availing the credit of input tax has been found non-existent or not to be conducting any business from any place for which registration has been obtained; or d) the registered person availing any credit of input tax is not in possession of a tax invoice or debit note or any other document prescribed under rule 36 , may, for reasons to be recorded in writing, not allow debit of an amount equivalent to such credit in electronic credit ledger for discharge of any liability under section 49 or for claim of any refund of any unutilised amount.
(2) The Commissioner, or the officer authorised by him under sub-rule
(1) may, upon being satisfied that conditions for disallowing debit of electronic credit ledger as above, no longer exist, allow such debit.
(3) Such restriction shall cease to have effect after the expiry of a period of one year from the date of imposing such restriction."]
What changed, and when
The amendment trail, newest first — because the version that applies to your case depends on the period.
2019-12-26 · Inserted
75/2019-CTdated
Inserted vide Notification No. 75/2019 – CT dated 26.12.2019.
Where this comes from
Text reproduced from the Central Board of Indirect Taxes and Customs, as available on 2026-09-05. The explanation and practice notes above are GSTZone’s own, written for this hub. If you spot anything out of date, tell us and we’ll fix it — this hub is checked daily against CBIC.
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