By S&S Co. Advocates & Solicitors · Published 14 April 2026 · Informational content, not legal advice
About this article: A general explainer prepared by S&S Co. Advocates & Solicitors on a recurring type of dispute. It does not report a specific judgment or order, names no parties and gives no case citation, so it should not be cited as authority. Law and practice change; please verify against the current statute and primary sources before relying on it.
Rule 86A of the Central Goods and Services Tax Rules, 2017 allows a Commissioner, or an authorised officer not below the rank of Assistant Commissioner, to restrict the use of the amount in a taxpayer's electronic credit ledger. The power depends on the officer having reasons to believe that the credit was fraudulently availed or is otherwise ineligible, for example because it is based on invoices from a non-existent supplier or without actual receipt of the goods or services.
High Courts have stressed that this is a narrow, precautionary power. The reasons to believe must exist and be recorded when the block is imposed, and they should relate to specific facts, not to a general reference to an investigation. A block also operates only for a limited time. The rule provides that the restriction ceases to have effect after one year from the date it was imposed.
A block is not a substitute for adjudication. If the department wants to recover credit it considers ineligible, it must proceed by a show cause notice and adjudication under the CGST Act, with an opportunity of being heard. Blocking was a recurring subject of writ petitions, and the remedy usually sought is an order to unblock the ledger.