What Is the Electronic Credit Ledger in GST?

The electronic credit ledger is the account on the GST portal that holds the input tax credit a registered person has claimed. The electronic input tax credit ledger is another name for the same account. Rule 86(1) of the CGST Rules, 2017 requires it to be maintained in FORM GST PMT-02 for each registered person eligible for input tax credit, and requires every claim of input tax credit to be credited to it. Section 2(46) of the CGST Act, 2017 defines the electronic credit ledger as the ledger referred to in Section 49(2), and under Section 49(2) the credit self-assessed in the return is credited to the ledger. Section 41(1) entitles a registered person to avail the credit of eligible input tax as self-assessed in the return. The balance is held under four separate heads: IGST, CGST, SGST or UTGST, and cess. Rule 86(5) provides that no entry may be made directly in the electronic credit ledger under any circumstance, save as provided in Chapter IX.

After logging in to the GST portal with the username and password, the registered person opens the electronic credit ledger at Services > Ledgers > Electronic Credit Ledger. The screen shows the balance under each of IGST, CGST, SGST/UTGST and cess, and nothing on it can be edited.

Alongside the balance as on today's date, the screen shows a Provisional Credit Balance view and a Blocked Credit Balance view. The transaction view of the ledger takes a From and To date selected from the calendar, and a GO button applies the selected period; the Blocked Credit Balance view takes the same date range. The Provisional Credit Balance opens on a link with no period to select. SAVE AS PDF and SAVE AS EXCEL buttons save what is on screen.

Input tax credit auto-populates from GSTR-2B into GSTR-3B, and GSTN stated in an advisory of 8 October 2025 that it would continue to auto-populate without any manual intervention. The credit claimed in GSTR-3B is credited to the electronic credit ledger when the return is filed, not when an invoice is received, and credit reversed in an earlier period and later re-availed is also credited to the ledger through a return.

Under Rule 86(1), every claim of input tax credit under the Act is credited to the ledger, so the ledger holds the credit the registered person claimed, whether or not the person was entitled to claim it; the portal does not test the claim against GSTR-2B before crediting it. Rule 36(4) applies when the credit is availed in the return, before the ledger is credited, and forbids availment on an invoice or debit note unless two cumulative conditions are met: the supplier must have furnished the details in GSTR-1, as amended in GSTR-1A if any, or through the invoice furnishing facility, and those details must also have been communicated in GSTR-2B under Rule 60(7). Section 16(2)(aa) of the Act likewise provides that a registered person is not entitled to the credit unless the supplier has furnished the details and they have been communicated to the registered person.

Before the ledger is credited, the details the suppliers furnished are matched against the purchases in GSTR-2B and Table 4 of GSTR-3B. Rule 88D applies where the credit availed in GSTR-3B exceeds the credit available in GSTR-2B by the amount and percentage the GST Council recommends. The registered person is then intimated of the difference in Part A of FORM GST DRC-01C, and given seven days to pay it with interest or explain it. An amount left unpaid and unexplained, or explained unacceptably, is liable to be demanded under Section 73, 74 or 74A, so Table 4 of GSTR-3B should be reconciled against GSTR-2B every month.

Section 49(4) of the CGST Act, 2017 permits the amount available in the electronic credit ledger to be used for making any payment towards output tax under the CGST Act or the IGST Act, and Section 2(82) defines output tax as the tax chargeable on taxable supplies made by the person, excluding tax payable by him on reverse charge basis. The ledger can therefore be used to pay output tax and nothing else, and interest, penalty, late fee and tax under reverse charge must be paid in cash from the electronic cash ledger. Tax under reverse charge, once paid in cash, is creditable, subject to the Section 16 conditions, so a business that pays reverse-charge tax in a month takes the credit in that same month.

CBIC clarified in Circular No. 172/04/2022-GST dated 6 July 2022 that a payment towards output tax may be made from the ledger whether the tax was self-assessed in the return or became payable as the outcome of proceedings. A demand for output tax raised in scrutiny, audit or adjudication can therefore be discharged from credit. The circular also clarified that where a refund sanctioned in cash is found to have been erroneous, the registered person cannot repay it from the credit ledger.

Rule 86(4B), inserted by Notification No. 14/2022-Central Tax dated 5 July 2022, provides for re-crediting the ledger where a registered person deposits an erroneous refund. Circular No. 174/06/2022-GST of 6 July 2022 sets out the procedure. The deposit is made in Form GST DRC-03, debited from the electronic cash ledger and not from credit, with interest and any penalty, and the reason stated on the form. The proper officer then re-credits the same amount by an order in Form GST PMT-03A, which the circular states should preferably be passed within thirty days of the request or of full payment, whichever is later.

Rule 86(4B) covers an erroneous refund sanctioned under Section 54(3) and an erroneous refund sanctioned under Rule 96(3). Until 8 October 2024 clause (b) covered a Rule 96(3) refund only where it was obtained in contravention of Rule 96(10); Notification 20/2024-Central Tax dated 8 October 2024 struck those words out and omitted Rule 96(10) itself, both on the day of publication. Circular 174/06/2022-GST, issued in July 2022 while Rule 96(10) was still in force, lists four categories of erroneous refund that can be re-credited: a refund of integrated tax obtained in contravention of Rule 96(10); a refund of unutilised credit on exports made without payment of tax; a refund of unutilised credit on zero-rated supplies to an SEZ developer or unit without payment of tax; and a refund of unutilised credit on account of an inverted duty structure. Since 8 October 2024 the first category extends to any erroneous refund of integrated tax under Rule 96(3). On 8 October 2026 the GST Council recommended that the omission of Rule 96(10) take effect from 23 October 2017; no notification has yet given it that effect.

The electronic credit ledger holds input tax credit, and the electronic cash ledger holds money the registered person has deposited by challan. The electronic liability register holds neither and only records what the person owes; it is credited when either of the other two is debited.

Under Rule 87(13) a registered person may transfer any amount of tax, interest, penalty, fee or any other amount held in the electronic cash ledger to the cash ledger for another head, in FORM GST PMT-09. Rule 87(14) extends the same form to a transfer of central or integrated tax to a distinct person under Section 25(4) or (5), and its proviso bars that transfer where the transferor has any unpaid liability in his electronic liability register. Sections 49(10) and (11) are the corresponding provisions of the Act. Credit may not be transferred between heads.

Money is deposited in the cash ledger through a challan generated in FORM GST PMT-06 under Rule 87(2), and that challan is valid for fifteen days. Rule 85(4) specifies what must be paid from cash: tax deducted under Section 51, tax collected under Section 52, tax payable on reverse charge basis, and tax payable by a composition taxpayer under Section 10. Interest, penalty, fee and any other amount are subject to the same requirement.

The Commissioner, or an officer he authorises who is not below the rank of an Assistant Commissioner, may block a registered person's electronic credit ledger under Rule 86A of the CGST Rules, 2017 for reasons recorded in writing, where he has reasons to believe that credit available in the ledger has been fraudulently availed or is ineligible. Under the blocking order, debit of an amount equivalent to that credit is not allowed, either to discharge a liability under Section 49 or to claim a refund of any unutilised amount. Notification 75/2019-Central Tax dated 26 December 2019 inserted Rule 86A into the Rules.

Rule 86A specifies the grounds in four clauses, and CBIC directs officers to rely on those grounds alone:

• Non-existent supplier: Credit taken on an invoice or debit note issued by a registered person found non-existent or not conducting business from the registered place.
• No receipt of goods or services: Credit taken on an invoice or debit note without the goods or services actually having been received.
• Tax not paid to the Government: Credit taken on an invoice or debit note where the tax charged has not been paid to the Government.
• Non-existent recipient: The registered person availing the credit is found non-existent or not conducting business from the registered place.
• No document: The registered person availing the credit is not in possession of an invoice, a debit note or any other document prescribed under Rule 36.

Each of the five grounds concerns the invoice, or the registered person who issued it or availed credit on it, and not the nature of the supply, by which Section 17(5) bars particular credits outright; credit blocked under Rule 86A was availed and is valid on its face.

CBIC issued further guidance on the power in an instruction of 2 November 2021, CBEC-20/16/05/2021-GST. The Commissioner or Principal Commissioner is the proper officer, and the Board advises in the instruction that he authorise subordinates by monetary band: a Deputy or Assistant Commissioner where the ineligible or fraudulently availed credit does not exceed one crore rupees, an Additional or Joint Commissioner where it is above one crore and up to five crore, and a Principal Commissioner or Commissioner where it is above five crore. These bands are the Board's advice on the internal allocation of work, and do not limit jurisdiction; the only rank the Rule itself fixes is Assistant Commissioner. The same paragraph of the instruction extends the power, on the same bands, to the Additional or Principal Additional Director General of the DGGI. Where an Audit Commissionerate finds fraudulent or ineligible credit in an audit under Section 65 or 66, the Board advises it in the instruction to refer the matter to the jurisdictional CGST Commissioner rather than block the ledger itself.

The Board records in the instruction that the power is extraordinary and must not be exercised in a mechanical manner. Exercising it requires an objective determination based on intelligent care and evaluation, as distinguished from a purely subjective consideration of suspicion. The reasons to believe are recorded in writing on file before the officer acts.

Under Rule 86A(3) of the CGST Rules, 2017, a Rule 86A restriction ceases to have effect after the expiry of one year from the date it was imposed, without any application to unblock it. The Board's instruction states that once the year expires, the registered person may debit the credit again, subject to any other action that may be taken against him. The text of Rule 86A does not prevent a fresh restriction on fresh grounds, and the underlying investigation continues.

Before the year expires, Rule 86A(2) allows the Commissioner or the authorised officer, on being satisfied that the conditions for disallowing debit no longer exist, to allow the debit. To have the debit allowed, obtain the reasons recorded in writing and identify which of the five grounds is invoked, because the answer to each is a different set of documents. In practice, answer that ground specifically with the invoices, proof of payment and evidence of the supplier's existence on which it is based. Then ask the officer who imposed the restriction, or the Commissioner, to allow the debit under Rule 86A(2).

The Board asks officers in its instruction to endeavour to complete investigation and adjudication within the year of restriction, giving as reasons the protection of the interests of the revenue and the effect on the person's working capital, with the stated object that the liability can be recovered. Nothing follows automatically if the year passes with the investigation unfinished.

Whether a registered person is entitled to a hearing before the block is imposed is contested. Rule 86A itself contains no hearing requirement. On 8 October 2026 the GST Council recommended amending Rule 86A to let a taxpayer file an objection against a block and be heard in person before the proper officer decides on it; no notification has yet made that amendment. A Division Bench of the Karnataka High Court held in K-9 Enterprises v State of Karnataka, decided 2 April 2024, that a pre-decisional hearing was required before the ledger was blocked. It held further that an officer cannot act on the borrowed satisfaction of another officer, because the reasons to believe must be his own. The State of Karnataka petitioned the Supreme Court, which on 16 May 2025 dismissed the petition on the ground of delay as well as on merits. The order records no reasons on Rule 86A. What effect a dismissal in that form has outside Karnataka is itself an argued question.

The Delhi High Court has taken a different view of the underlying issue, holding in September 2024 that an order under Rule 86A(1) requires no prior show cause notice, because the provision is by its nature an emergent one. High Courts have continued to decide the question through 2026; at least one has treated the requirement as a hearing after the block rather than before it. A business facing a block should therefore ask which High Court's view governs its own case, and should check the position as at the date of its own order.

Recovery of wrongly availed credit is made separately from the block, under Sections 73 and 74, with interest under Section 50(3). Under the Explanation to Rule 88B(3), wrongly availed credit is treated as utilised only when the ledger balance falls below the amount wrongly availed, and the extent of utilisation is the amount by which it falls below. Interest under Section 50(3) therefore runs from the date of utilisation, not from the date the credit was availed. Where the balance falls through payment of tax by a return, clause (2)(a) of that Explanation fixes the date of utilisation as the Section 39 due date or the actual date of filing, whichever is earlier, so for a return filed late interest runs from the due date.

Blocked credit is shown in the electronic credit ledger itself, at Services > Ledgers > Electronic Credit Ledger, not in a separate report. On the ledger page, the blocked amount is shown in the Blocked Credit Balance, and clicking the Description (Unblocked/Blocked) hyperlink shows the details of the tax official who blocked or unblocked the amount. An Attachment hyperlink opens any document the tax official uploaded, and the Board's instruction records that the registered person is informed of the action on the portal, along with the details of the officer who disallowed the debit. A blocked amount is visible to the registered person but not usable, and only a tax officer can change its status.

Under Rule 86B of the CGST Rules, 2017, a registered person may not pay more than ninety-nine per cent of the output tax liability from the electronic credit ledger in any month in which the value of the person's taxable supply, other than exempt and zero-rated supply, exceeds fifty lakh rupees. At least 1% of the output tax liability, not 1% of the value of supply, is then paid in cash, unless an exception in the first proviso applies.

Rule 86B is made under Section 49(12) of the CGST Act, 2017, which lets the Government specify the maximum proportion of output tax liability that may be discharged through the electronic credit ledger; Section 49(4) confers the power to impose conditions and restrictions on the ledger's use. Notification 94/2020-Central Tax dated 22 December 2020 inserted Rule 86B with effect from 1 January 2021. The same notification inserted Rule 21(g), which makes a registration liable to be cancelled where the registered person violates the provisions of Rule 86B.

The exceptions are in clauses (a) to (f) of the first proviso. Clauses (a) to (e) date from 1 January 2021 with the Rule itself; clause (f) was inserted by Notification 20/2025-Central Tax dated 31 December 2025, the Central Goods and Services Tax (Fifth Amendment) Rules, 2025, and came into force on 1 February 2026, along with the Rule 31D it refers to. For every tax period before February 2026 the first proviso contained clauses (a) to (e), and the limitation periods under Sections 73 and 74A have not expired for most of those periods.

• Income tax paid: More than one lakh rupees of income tax has been paid in each of the last two qualifying financial years. A year qualifies once the time limit to file the return under Section 139(1) of the Income-tax Act, 1961 has expired. Early in a financial year, the Section 139(1) filing deadline for the year just ended has not yet passed, so the two qualifying years are the two years before it. The payer may be the registered person, the proprietor, karta or managing director, any two partners or whole-time directors, or members of the managing committee or board of trustees.
• Refund on zero-rated supplies: The registered person received a refund of more than one lakh rupees in the preceding financial year on unutilised credit under clause (i) of the first proviso to Section 54(3).
• Refund on inverted duty structure: The registered person received a refund of more than one lakh rupees in the preceding financial year on unutilised credit under clause (ii) of the first proviso to Section 54(3).
• Cash already paid above 1%: Output tax has already been discharged in cash for an amount exceeding 1% of the total output tax liability, applied cumulatively, up to that month in the current financial year.
• Government and public bodies: The registered person is a Government department, a public sector undertaking, a local authority or a statutory body.
• Retail-sale-price goods: A registered person other than a manufacturer is exempted only in respect of goods specified under Rule 31D, on which the supplier has paid tax on the retail sale price. Rule 31D covers pan masala and tobacco products.

The second proviso operates independently of clauses (a) to (f), and under it the Commissioner or an officer authorised by him may remove the restriction after such verifications and safeguards as he may deem fit. Whether Rule 86B applies in a month depends on three questions, taken in order:

1. Is the value of the taxable supply this month, leaving out exempt and zero-rated supply, more than ₹50 lakh? If No, Rule 86B does not apply this month.
2. Does the registered person fall in any of clauses (a) to (e)? If Yes, Rule 86B does not apply this month. Clause (f) disapplies the Rule only for the Rule 31D goods, and the rest of the person's supplies remain subject to it.
3. Has the Commissioner, or an officer he authorises, removed the restriction in this case under the second proviso? If Yes, Rule 86B does not apply this month.

Suppose a trader to whom Rule 86B applies has ₹62,00,000 of taxable supply for the month, excluding exempt and zero-rated supply, output tax at 18%, which is ₹11,16,000, and a credit ledger balance of ₹13,45,000. Rule 86B caps ledger utilisation at ninety-nine per cent of the output tax liability, so ₹11,04,840 may be paid from the ledger and ₹11,160 must be paid in cash through the electronic cash ledger; in an input tax credit calculator, that minimum cash payment has to be applied after the set-off, not before it. The ledger balance at the end of the month is ₹2,40,160.

If an officer has also blocked ₹6,73,000 of that balance under Rule 86A, the usable balance falls to ₹6,72,000, which is below the ₹11,04,840 cap, so the block, and not the Rule 86B cap, then limits the payment. The trader pays ₹4,44,000 in cash instead of ₹11,160, a difference of ₹4,32,840 in one month's working capital. The blocked ₹6,73,000 is not reversed and is not removed from the ledger, and it remains unusable until the officer allows the debit under Rule 86A(2), or until the restriction ceases to have effect one year from the date it was imposed.

Unutilised input tax credit is refundable in two situations only. Section 54(3) of the CGST Act, 2017 lets a registered person claim refund of unutilised credit at the end of any tax period, and its first proviso allows it in no cases other than those in clause (i), zero-rated supplies, being exports and SEZ supplies made without payment of tax, and clause (ii), an inverted duty structure, meaning accumulation on account of the rate of tax on inputs being higher than the rate on output supplies. Outside those two cases, unutilised credit carries forward in the ledger until there is output tax to set it against. The ledger is debited under Rule 86(3) when the refund application is filed.

The application is made in FORM GST RFD-01 within two years from the relevant date under Section 54(1). No refund of unutilised credit is allowed where the supplier has claimed drawback of central tax or refund of the IGST paid on those supplies, under the third proviso to Section 54(3). If the refund is rejected in whole or in part, the rejected amount is re-credited to the ledger by the proper officer by an order in FORM GST PMT-03 under Rule 86(4). Under the Explanation to Rule 86, a refund is deemed to be rejected if the appeal is finally rejected, or if the claimant undertakes to the proper officer that he will not appeal.

Section 54(3) opens with the words "subject to the provisions of sub-section (10)". Section 54(10) allows the proper officer to withhold the refund, or to deduct from it, where the claimant has defaulted in furnishing any return. The same power applies where the claimant owes tax, interest or penalty that no court or tribunal has stayed. A claimant with returns outstanding may therefore receive nothing under Section 54(3) until those returns are filed.

Yes, where the exporter supplies under bond or a letter of undertaking (LUT) without paying integrated tax. Credit on inputs then accumulates in the ledger with no output tax to set it against, and Section 16(3) of the IGST Act, 2017 and Section 54(3) allow that accumulation to be refunded. The exporter may instead pay IGST on the export and claim that tax back, which is not a claim on the credit ledger, except for pan masala, tobacco products and certain mint oils, which Notification 01/2023-Integrated Tax excludes from that route. Under Section 16(5), neither refund is allowed on goods subject to export duty.

Section 54(6) allows the proper officer to sanction ninety per cent of a claim for refund of unutilised input tax credit on zero-rated supplies provisionally, but only for claimants outside a category the Government has power to notify. Notification 14/2025-Central Tax dated 17 September 2025, made under Section 54(6), notified that category and took effect on 1 October 2025. It excludes from provisional refund any person who has not undergone Aadhaar authentication under Rule 10B, and any person supplying areca nuts, pan masala, tobacco and manufactured tobacco substitutes, or essential oils; a claimant in either description waits for the order under Section 54(5).

For other claimants, Rule 91(2) now requires the proper officer to make the FORM GST RFD-04 order on the basis of identification and evaluation of risk by the system, so provisional sanction is no longer automatic. Its proviso lets him decline provisional refund for reasons recorded in writing and proceed instead under Rule 92. Under Instruction No. 06/2025-GST of 3 October 2025, an application the system scores low-risk gets ninety per cent sanctioned provisionally without scrutiny, and an application that is not low-risk gets none.

Section 54(6) as in force applies to a claim on account of zero-rated supply and to no other claim, so an inverted-duty claimant under clause (ii) of the first proviso to Section 54(3) has no right to provisional sanction and waits for the order under Section 54(5). Section 155 of the Finance Act, 2026 amends Section 54(6) to extend provisional sanction to a claim of unutilised input tax credit allowed under clause (ii) of the first proviso to sub-section (3), and comes into force on a date the Government appoints by notification. No appointing notification has been issued, so the amendment is not yet in force.

An inverted duty structure refund is the refund that clause (ii) of the first proviso to Section 54(3) of the CGST Act, 2017 allows where credit has accumulated because the rate of tax on inputs is higher than the rate on output supplies. In the ledger, the accumulation is a balance that the output tax set against it does not exhaust. Nil-rated and fully exempt output supplies are outside the clause, and the Government may notify supplies on which even this refund is not allowed.

Clause (ii) is worded in terms of inputs. Whether input services are included in the computation follows from the refund formula in Rule 89(5) rather than from Section 54(3). That formula has been amended more than once, and a claimant should apply the version in force for the period claimed. Explanation (e) to Section 54 fixes the relevant date for this clause as the due date for furnishing the return under Section 39 for the period in which the claim arises, and the two-year limit runs from that date.

Tax collected at source by an operator in electronic commerce is credited to the seller's electronic cash ledger, not the credit ledger. Section 52(7) of the CGST Act, 2017 provides that the supplier who supplied through the operator shall claim credit, in his electronic cash ledger, of the amount collected and reflected in the operator's statement, and the amount is then available to pay tax, interest, penalty or fee, as a challan deposit is.

IGST credit can be used to pay IGST, CGST and SGST or UTGST liability; CGST credit, CGST and IGST but not SGST or UTGST; SGST or UTGST credit, its own liability and IGST but not CGST; and cess credit, only cess. Under Section 49(5), clause (e) provides that central tax shall not be utilised towards payment of State tax or Union territory tax, and clause (f) provides the converse for State and Union territory tax against central tax. A business with an SGST credit balance that owes CGST in the same month therefore has to pay that CGST in cash. Section 49(5) does not mention cess; the restriction on cess credit is the proviso to Section 11(2) of the Goods and Services Tax (Compensation to States) Act, 2017, under which credit of cess shall be utilised only towards payment of that cess. That proviso contains no restriction on what may be used to pay cess. IGST credit must be exhausted before either of the other heads is used, and Rule 88A and Sections 49A and 49B govern the order in which the balances are applied and how remaining IGST credit may be split.

The electronic credit ledger balance is the credit claimed in returns, less what has been used, so it will not match the purchase register or the books. It is reconciled against the filed GSTR-3B, not against the invoices; a mismatch with the purchase register commonly arises before the return is filed, in the GSTR-2B reconciliation.

Under Rule 86(1) of the CGST Rules, 2017, every claim of input tax credit is credited to the ledger. Rule 86(5) forbids any direct entry save as Chapter IX provides, so the registered person cannot adjust the ledger to agree with the books. The common differences arise from credit claimed in a return not yet filed; a debit to discharge liability under Rule 86(2), which operates through Section 49 and also Sections 49A and 49B; a refund application that debited the ledger under Rule 86(3); and a rejected refund re-credited by an order in FORM GST PMT-03 under Rule 86(4). Where the ledger itself is wrong, the discrepancy is communicated to the jurisdictional officer through the portal in FORM GST PMT-04 under Rule 86(6). Under Rule 86(4A), tax that was wrongly or excessively paid by debit from the ledger is re-credited, again by an order in FORM GST PMT-03. Under Rule 86(4B), an erroneous refund that the registered person has deposited back through FORM GST DRC-03 is re-credited by an order in FORM GST PMT-03A.

The portal also maintains the Electronic Credit Reversal and Re-claimed Statement, which opens at Services > Ledgers, or from the dashboard quick links. It shows total credit reversed and total credit re-claimed for each return period, and those figures identify a balance that will not agree with the books because credit was reversed and later re-claimed. A blocked balance remains on the ledger as the registered person's credit, but it is not available for debit, so it is not a reconciling item in the ordinary sense.

Officers have blocked amounts larger than the balance in the ledger, which makes the balance negative and extends the block to credit the registered person has not yet earned. Whether Rule 86A permits that is disputed, and the question is pending before the Supreme Court. Division Benches of the Gujarat, Telangana, Delhi, Bombay and Punjab and Haryana High Courts have held that it does not. Division Benches of the Calcutta, Allahabad and Andhra Pradesh High Courts, and the Madras High Court, have held that it does. On 8 July 2025 the Supreme Court recorded a conflict between the Delhi High Court's decision in Best Crop Science and the Madras High Court's in Skanthaguru Innovations and issued notice in Union of India v Anand Traders, SLP(C) No. 17879/2025; later petitions on the point have been tagged with it.

On the portal, where a tax official blocks an amount in excess of the balance available, a debit entry for that amount is posted and the balance becomes negative. Later credit is then adjusted against the negative balance, and a negative amount cannot be used to pay any liability.

The Gujarat High Court held in Samay Alloys India Pvt Ltd v State of Gujarat, decided 3 February 2022, that credit must be available in the ledger before Rule 86A can be invoked at all. Inserting a negative balance where no credit was available is, on that reasoning, without jurisdiction. A Division Bench of the Telangana High Court agreed in Laxmi Fine Chem v Assistant Commissioner, holding that nothing in the rule allows an officer to block credit a taxpayer might earn in future. The Delhi High Court concurred with both in Best Crop Science Pvt Ltd v Principal Commissioner, decided 24 September 2024. It set aside eight blocking orders, in each case to the extent the order disallowed debit beyond the credit available when it was passed. The Bombay High Court took the same view in Hemang Bipin Varaiya v State of Maharashtra, decided 18 March 2026. It held that a block to the extent of the credit actually available is valid, and that blocking future credit is not. The Punjab and Haryana High Court took the same view in K K Alloys (Unit II) v Union of India, decided 19 November 2025, holding that without credit available in the ledger there cannot be negative blocking.

The Calcutta High Court took the contrary view in Basanta Kumar Shaw, reasoning that Rule 86A nowhere uses the expression negative blocking and nowhere requires a positive balance. The Allahabad High Court had reached the same result in R.M. Dairy Products LLP v State of U.P., decided 15 July 2021, and a later bench of that Court has referred the question to a larger bench. The Andhra Pradesh High Court agreed with Calcutta and Allahabad in Sugna Sponge & Power Pvt Ltd v Superintendent of Central Tax, decided 13 December 2024, and the Madras High Court held in Tvl. Skanthaguru Innovations Pvt Ltd v Commercial Tax Officer, decided 28 November 2024, that negative blocking is within the scope of Rule 86A. The Delhi and Bombay High Courts both considered the Calcutta reasoning and did not adopt it.

In Karuna Rajendra Ringshia, decided 21 October 2024 in W.P.(C) No. 7250/2024, the Delhi High Court took the same view, and the department petitioned the Supreme Court against it. On 9 July 2025 the Court found no case for interference under Article 136, dismissed the petition, and expressly kept the department's other remedies for recovery open. That order records no reasons on Rule 86A.

Paragraph 3.3.2 of Instruction CBEC-20/16/05/2021-GST states that the amount disallowed should not be more than the credit believed to have been fraudulently availed or ineligible. The Delhi High Court read that instruction as supporting the taxpayer rather than the department.

Under Rule 86A, a blocked balance is not available to the registered person for debit while the block lasts. The Rule does not establish that anything is owed, and it does not entitle an officer to make debit entries that amount to permanent recovery. The department recovers the money by a determination under Sections 73 or 74, with provisional attachment available under Section 83 once proceedings have begun, so a block that lapses creates no demand, and the removal of a negative block does not end an investigation into the same credit. A demand for interest under Section 50(3) is made independently of any challenge to the block.