A Rule 86A Block on Your Credit Ledger Dies After One Year: Madras High Court

The Madras High Court has ordered a credit ledger unblocked after the department kept a Rule 86A restriction running for more than two and a half years, holding that the block lapses by itself once one year is up.

The Madras High Court has told the State Tax Department to unblock a trader's electronic credit ledger, in an order of 21 August 2026 in the case of M/s Metal Trade Incorporation.

The department had blocked the credit on 27 January 2023, on the view that the dealer was non-existent and trading in bills, and then left it in place. By the time the matter reached the Court more than two and a half years had gone by, with the department relying on later communications to keep the restriction alive.

The Court held that Rule 86A does not permit that. A restriction imposed under Rule 86A(1) ceases to have effect on the expiry of one year from the date it was imposed, and no subsequent letter can revive it. Rule 86A is a temporary protective measure while an assessment is completed, not an indefinite freeze. The ledger was directed to be unblocked forthwith, leaving the department free to complete its assessment and recover any dues in the ordinary way.

What this means for you. If your credit ledger has been blocked for more than a year, the block has already expired in law and you can ask for it to be lifted. CBIC's own guidelines of 2 November 2021 say the same thing: "Such restriction shall cease to have effect after the expiry of a period of one year from the date of imposing such restriction." Read them at https://gstcouncil.gov.in/sites/default/files/2024-06/guidelines_on_rule_86a.pdf

Topics:rule 86ablocked itcelectronic credit ledgermadras high courtchennai gstinput tax creditgst ledger blockedtamil nadu gstcredit ledger unblockcbic guidelines

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