Ease in GST appeal: Now you can make pre-deposit payment for through input tax credit, rules Supreme Court, know who will benefit from it
In what may be termed as an important judgement for Goods and Services Tax (GST) registered taxpayers, the Supreme Court on May 19, 2025, allowed using input tax credit (ITC) to pay the mandatory pre-deposit amount required for filing an GST litigation case appeal. In technical terms, the Supreme Court rejected the petition filed by the government that challenged the Gujarat High Court’s judgement which allowed using electronic credit ledger (ECL) for paying the mandatory pre-deposit amount.#sr_widget.onDemand p, #stock_pro.onDemand p{font-size: 14px;line-height: 1.28;} .onDemand .live_stock{left:17px;padding:1px 3px 1px 5px;font-size:12px;font-weight:600;line-height:18px;top:9px} #sr_widget.onDemand .sr_desc{margin:0 auto 0;} #sr_widget.onDemand .sr_desc{color: #024d99;margin-top:10px;} #sr_widget.onDemand .crypto .live_stock .lb-icon{8px 6px 5px 3px !important} #sr_widget.crypto.onDemand a.text{border-bottom:1px solid #ccc;padding-bottom:5px;display:block;width:100%} #sr_widget.onDemand .sr_desc .text p, #stock_pro.onDemand .sr_desc .text p{font-size:12px;font-weight:400;} According to the official GST website, in the Electronic Credit Ledger (ECL), all input tax credits accrued on account of inward supplies made by a taxpayer within a tax period are accumulated. Interestingly the Gujarat High Court cited the precedent set by the Bombay High Court in the case of Oasis Realty and said when that judgement is read along with a GST Policy wing circular issued on July 6, 2022, the matter becomes clear.
“It has been clarified that the payment of a pre-deposit can be made by utilizing the Electronic Credit Ledger (ECL). In view of the aforesaid, we hold that the petitioner may utilize the amount available in the Electronic Credit Ledger to pay the 10% of Tax in dispute as prescribed under sub-section (6) of Section 107 of the CGST Act,” said Gujarat High Court in its judgement dated October 17, 2024.
Read below to know how this Supreme Court judgement impacts GST registered taxpayers, and which taxpayers should benefit from the legal reasonings used in this judgement.
Brief of this case
According to the Gujarat High Court order dated October 17, 2024 which was accepted by the Supreme Court on May 19, 2025, here are the details:a:hover{text-decoration:none;} .liveEventMain_widget{margin-top:15px;padding-top:24px;border-top:2px solid #000;position:relative;font-family:Montserrat;} .liveEvent_slider{position:relative;overflow:hidden;} .liveEvent_slider ul{white-space:nowrap;list-style:none;margin-top:12px;} .liveEvent_slider ul.sliderContainer{margin-bottom:30px;} .liveEvent_slider ul li{white-space:normal;width:282px;vertical-align:top;display:inline-block;margin-right:12px;border-radius:12px;box-shadow: 0px 4px 12px 0px #2407461F;background-color:#fff;overflow: hidden;} .images_wrap{position:relative;} .images_wrap .cover_img{object-fit:cover;object-position:center;border-top-left-radius:4px;border-top-right-radius:4px;} .images_wrap .author_img{position:absolute;left:10px;top:13px;border-radius:10px;} .images_wrap::before{background-image: linear-gradient(180deg, rgba(11, 11, 46, 0) 20.31%, rgba(11, 11, 46, .6) 61.46%, #0b0b2e);content: "";height: 100%;left: 0;position: absolute;right: 0;width: 100%;} .liveEventMain_widget .details{padding:12px;} .liveEventMain_widget .category{font-size:12px;line-height:14px;font-weight:700;color:#6a11b0;margin-bottom:8px;} .liveEventMain_widget .course_name{font-size:16px;line-height:20px;font-family:Faustina;-webkit-line-clamp:2;overflow:hidden;height:40px;display:-webkit-box;-webkit-box-orient:vertical;font-weight:600;color:#000;} .liveEventMain_widget .details .author_name{font-size:13px;line-height:16px;color:#333;font-weight:400;margin-top:4px;-webkit-line-clamp:2;overflow:hidden;height:32px;display:-webkit-box;-webkit-box-orient:vertical;} .liveEventMain_widget .view{border: 1.5px solid #D51131; display: block; padding: 8px 0; text-align: center; border-radius: 4px; font-size: 14px; line-height: 16px; color: #D51131; margin-top: 12px; width: 100%; font-family: Montserrat; font-weight: 600; cursor: pointer;} .liveEventMain_widget .view span{display: inline-block; width: 6px; height: 6px; border-top: 1.5px solid #ed193b; border-left: 1.5px solid #ed193b; transform: rotate(90deg); position: relative; left: 5px; top: -2px;} .liveEventMain_widget .view span::after{content: ''; display: inline-block; width: 11px; border-top: 1.5px solid #ed193b; transform: rotate(45deg); position: absolute; top: 3px; left: -2px;} .liveEventMain_widget .arrow_btn{width: 26px; height: 25px; position: absolute; z-index: 11; background-size: 312px; cursor: pointer;} .liveEventMain_widget .nextprev-btn{display:inline-block;width: 100%; position: absolute; top: 59%;} .liveEventMain_widget .prev-btn{background-position: -212px -2px;left: -12px;} .liveEventMain_widget .next-btn{background-position: -241px -2px; right: -3px;left:unset;} .liveEventMain_widget .arrow_btn.disable{opacity:0.5;} .liveEventMain_widget .ts-dots{display:inline-block;position:absolute;top:34px;right:10px;} .liveEventMain_widget .ts-dots ul{display:inline-block;} .liveEventMain_widget .ts-dots li{width:7px;height:7px;border-radius:50%;background-color:#cdcdcd;margin:0 2px;display:inline-block;} .liveEventMain_widget .ts-dots li span{display:none;} .liveEventMain_widget .ts-dots li.active{background-color:#ed193b;} .liveEventMain_widget .topContain { display: flex; align-items: center; gap: 6px; } .liveEventMain_widget .topContain .imgBox { max-width: 40px; } .liveEventMain_widget .topContain .logoTitle { font-family: "Montserrat", "Verdana"; font-weight: 700; font-size: 20px; line-height: 100%; } .liveEventMain_widget .topContain .logoSubTitle{ position: relative; font-size: 18px; font-weight: 500; line-height: 1.2; color: #747474; margin-left: 24px; } .liveEventMain_widget .topContain .logoSubTitle:before{ content:''; position: absolute; left: -13px; top: 0; width: 1px; height: 100%; background-color: #838383; } .liveEventMain_widget .liveEvent_slider .liveEventCardContainer{ } .liveEventMain_widget .liveEvent_slider .liveEventCardContainer .liveEventCard{ display: flex; } .liveEventMain_widget .liveEvent_slider .liveEventCardContainer .liveEventCoverImg{ }
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February 28, 2018 to January 14, 2021: The GST registered taxpayer who was an export company was availing refund of IGST (Integrated Goods and Services Tax) until the time Finance Act, 2021 removed this benefit. IGST is collected when interstate supply of goods or services have occurred.2020: Government issued them a tax demand notice for claiming refund of IGST.February 9, 2021 to December 26, 2022: The company paid Rs 3.36 crore as pre-deposit amount for filing an appeal against this order via GST DRC-03 form.April 25, 2023: Government issued another notice to this company and asked them not to use their input tax credit for paying the GST appeal case’s pre-payment. Consequently the company had to reverse the Rs 3.36 crore ITC claim and pay the pre-deposit using cash ledger.2023: Appeal against this 2nd tax notice issued on April 25, 2023 was filed in Gujarat High Court.This Rs 3.36 crore amount which this company paid was made via its electronic credit ledger (ECL) and this is the main contention of the government and hence why Gujarat High Court heard this matter. The government said this payment should have been made from the electronic cash ledger and not the credit ledger.
The case before Bombay High Court is about 2018 to 2021 IGST refund matter, and this case is still going on as on date.
Can GST appeal pre-payment be made using input tax credit? Gujarat High Court answers
Gujarat High Court in its judgement said:“In our view, Petitioner (the company) having to pay 10% of the Tax in dispute under clause (b) of Sub-section (6) of Section 107, can certainly utilise the amount of ITC available in the Electronic Credit Ledger. We hasten to add that in view of provisions of Subsection (3) of Section 49, the party may also pay this 10% of the Tax in dispute by utilising the amount available in the cash ledger. “
What legal reasoning did Gujarat High Court use that allowed ITC to be used for GST appeal pre-payments?
According to the order of Gujarat High Court which was ultimately held final by the Supreme Court, here are the details:Sub-section (4) of Section 49 provides that the amount available in the Electronic Credit Ledger may be used for making any payment towards output tax under the MGST Act or IGST Act subject to certain restrictions or conditions that may be prescribed. Sub-rule (2) of Rule 86 of MGST Rules provides for debiting of the Electronic Credit Ledger to the extent of discharge of any liability in accordance with the provisions of Section 49 of the MGST Act. Further, output tax in relation to a taxable person is defined in Clause (82) of Section 2 of MGST Act as the tax chargeable on taxable supply of goods or services or both but excludes tax payable on reverse charge mechanism. Therefore, any payment towards output tax, whether self- assessed in the return can be made by utilisation of the amount available in the Electronic Credit Ledger. Hence, a party can pay 10% of the disputed Tax either using the amount available in the Electronic Cash Ledger or the amount available in the Electronic Credit Ledger.
Gujarat High Court final judgement
Gujarat High Court quashed the order issued by the Central Board of Indirect Taxes and Customs (CBIC) and said the following:“Keeping in mind the ratio laid down by the Hon'ble Bombay High Court in the case of Oasis Realty (supra) as well as the circular dated 6th July 2022 issued by the GST Policy Wing, Central Board of Indirect Taxes and Customs, Ministry of Finance, Government of India, it has been clarified that the payment of predeposit can be made by utilizing the Electronic Credit Ledger (ECL). In view of the aforesaid, we hold that the petitioner may utilize the amount available in the Electronic Credit Ledger to pay the 10% of Tax in dispute as prescribed under sub-section (6) of Section 107 of the CGST Act.”
When an appeal against this order was filed in the Supreme Court, the Supreme Court rejected the appeal and upheld the order of the Gujarat High Court.
"We find that the impugned order passed by the High Court in R/SCA No. 10504/2023 would not call for any interference. Hence, the Special Leave Petition is dismissed," said the Supreme Court on May 19, 2025.
What is the significance of this order for GST registered taxpayers?
ET Wealth Online have asked various experts about the significance of this order for GST registered taxpayers, here’s what they said:Shivam Mehta, Executive Partner, Lakshmikumaran and Sridharan Attorneys, says: “The order re-affirms the stance previously adopted by various high courts. The decision will enable the taxpayers to use their accumulated credit balances for pre-deposit which will prevent their working capital from being tied up. The decision will also help taxpayers with ongoing court proceedings by providing a basis for seeking relief.”
Chartered Accountant Ashish Karundia: The dismissal of the Special Leave Petition (SLP) filed by the revenue department challenging the Gujarat High Court’s ruling brings significant relief to taxpayers, as it allows them to use input tax credit (ITC) for the mandatory pre-deposit required when filing appeals. However, it's important to remember that the dismissal of an SLP does not amount to the Supreme Court endorsing the lower court's decision. Since the Supreme Court’s order did not deal with the issue involved, it does not qualify as a binding legal precedent under Article 141 of the Constitution. Additionally, it should be noted that a separate SLP concerning the same issue—whether ITC can be used for mandatory pre-deposits—is still pending before the Court.
Chartered Accountant Ketan Gadhiya, Chairman - Indirect Tax Committee, Chartered Accountant Association Surat (CAAS): It is a welcome judgement from the Supreme Court of India regarding pre-deposit of tax while filling of appeal under CGST Act. It clears the ambiguity regarding pre-deposit of tax through cash ledger or credit ledger. Now tax payers can file their appeals without worrying for complying with the requirement of additional funds from bank/cash for filling of appeals under CGST Act-2017. It will reduce the working capital crunch of the business, which on one hand are budened with unnecessary litigation and on the other further budened by paying pre-deposit monies for making their voice heard in the appeals. In a way the clarification aligns with and supports the cardinal requirement of natural justice. Hope some day the blind and uniform requirements of pre-deposit is done away with in deserving cases.
Ankit Jain, Partner, Ved Jain & Associates: The biggest beneficiary of this decision would be the exporters of goods and/or services. Exporters accumulate credit which they have to claim as a refund from the GST authorities. Non-utilisation of ITC toward pre-deposit meant that the exporter is required to block his funds in making pre-deposit while his accumulated input tax credit remains idle. Now, with the Supreme Court's judgement, they would be able to utilise the input tax credit and the working capital requirement would come down.
For domestic suppliers, the impact would be limited and would vary from case to case. In most businesses, the input tax credit is usually spent within a month or so and no such credit gets accumulated. So, usually pre-deposit in such cases is made through cash ledger only.
Chartered Accountant Ashish Niraj, Partner, A S N & Company: “ Many times Taxpayers are convinced that their case is strong but faced difficulty arranging 10% pre-deposit for filing appeal, as it used to hit their working capital. This Supreme court judgement is going to give relief for many such assesee. Also Many Large Appeals were pending before various authorities where Pre-Deposit was done through Electronic Credit ledger and were pending since long as department was insisting on pre-deposit thorough cash ledger for admitting the appeal. Now this judgement will open the ways for them also.
Further Niraj explains that If we check the wordings of Rule 86 then at one place it states that “The electronic credit ledger shall be debited to the extent of discharge of any liability in accordance with the provisions of section 49 1 [or section 49A or section 49B].”. Also Circular No. 172/04/2022-GST dated 6th July 2022 states that “ As per sub-section (4) of section 49, the electronic credit ledger can be used for making payment of output tax only under the CGST Act or the IGST Act. It cannot be used for making payment of any interest, penalty, fees or any other amount payable under the said acts. Similarly, electronic credit ledger cannot be used for payment of erroneous refund sanctioned to the taxpayer, where such refund was sanctioned in cash.’’
The pre-deposit for appeal is to ensure for payment of liability and cannot be termed as interest, penalty etc, therefore Supreme court rightly dismissed the department’s SLP as GST Law prescribes for Payment through ECL for discharge of liabilities without any restriction .
Shashank Shekhar, Partner, DMD Advocates: The payment of the pre-deposit amount is a condition precedent for filing of statutory appeals under the GST law. This requirement of pre-deposit is to safeguard the interest of the revenue. An asseessee is required to make payment of 10% of the amount of tax in dispute, subject to a maximum of INR 20 crores, for filing appeal before the First Appellate Auhtority. Similarly, for filing appeal before the Appellate Tribunal, the assessee needs to additionally make a pre-deposit of 10% of the amount of tax in dispute, subject to a maximum of INR 20 crores. In the event of failure to make payment of such pre-dsposit amounts, an assessee will not be able to file appeal against statutory orders.
This requirement of pre-deposit is not applicable in cases of filing appeals where refund is involved or other situations where there is no demand of tax, etc.
Why is the pre-deposit amount required for filing an GST appeal case?
Pankaj Goel, Partner, CNK, explains: “The pre-deposit serves as a safeguard against frivolous or excessive claims by taxpayers while ensuring that the interest of the revenue is protected during the appeal process. It is a provisional mechanism that requires the taxpayer to make an initial payment before filing an appeal, thereby demonstrating a genuine commitment to the process and helping prevent abuse of the appellate system. This mechanism strikes a balance between the interests of the taxpayer and the government.Goyal adds: “A pre-deposit of 10% of the disputed tax amount is mandatory before filing an appeal with the First Appellate Authority (FAA). If the taxpayer wishes to further appeal against the order of the FAA before the Appellate Tribunal, an additional 10% of the disputed tax must be deposited. In case of a further appeal before the Hon’ble High Court or the Hon’ble Supreme Court, the full disputed amount is generally required to be paid, unless a stay is specifically granted by the respective Court.”
Does GSTN need to issue an advisory now about using ITC to pay pre-deposit for litigation cases?
Mehta says: "The functionality of payment of pre-deposit through credit ledger is already operational. Thus, the taxpayers have been utilising this option, except where department insists on payment through cash ledger. While the mechanism is already in place, an advisory outlining the procedural aspects and clarifying the fate of the payments already made by taxpayers would be a welcome step. The taxpayers who are currently using the electronic cash ledger for pre-deposits can now begin utilising their credit balances."#sr_widget.onDemand p, #stock_pro.onDemand p{font-size: 14px;line-height: 1.28;} .onDemand .live_stock{left:17px;padding:1px 3px 1px 5px;font-size:12px;font-weight:600;line-height:18px;top:9px} #sr_widget.onDemand .sr_desc{margin:0 auto 0;} #sr_widget.onDemand .sr_desc{color: #024d99;margin-top:10px;} #sr_widget.onDemand .crypto .live_stock .lb-icon{8px 6px 5px 3px !important} #sr_widget.crypto.onDemand a.text{border-bottom:1px solid #ccc;padding-bottom:5px;display:block;width:100%} #sr_widget.onDemand .sr_desc .text p, #stock_pro.onDemand .sr_desc .text p{font-size:12px;font-weight:400;}
This story originally appeared on: India Times - Author:Faqs of Insurances
