GST
Block in the first months of a new business
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Facts
New registrations with large credit and few sales can trigger risk checks. The same remedy applies: ask for reasons and show your business is real.
Provisions and law
- Rule 86A(1), CGST Rules 2017Officer not below Assistant Commissioner may disallow debit of ITC, for recorded reasons, to pay any liability or claim any refund, where the credit looks fraudulent or ineligible on listed grounds
- CBIC guidelines on Rule 86A, 2 November 2021Blocking needs material evidence and is not to be done mechanically or on mere suspicion
Analysis
Rule 86A grounds include a recipient not found at the declared place. A new business with heavy purchases, for example during setup, should be ready to show premises, staff, machines and the purpose of purchases. Example: ₹25 lakh of machinery credit in month two is normal for a factory; show the installation and the plan for production.
Conclusion
- Ask for the reasons for the block.
- Show premises, staff, photos and purchase use.
- Explain the setup phase in your representation.
- Invite a verification visit if helpful.
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ITC blocked
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