Pre-deposit provisions under GST

Pre-deposit provisions under GST

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Pre-deposit provisions under GST

The concept of pre-deposit is introduced under GST with a basic purpose of stoppage of unnecessary adjudication which is generally preferred by the appellant only to delay the demand. Due to the pre-deposit provision, there are major chances that only genuine appeal will be filed.

GST law requires the appellant to fulfil the pre-deposit provisions. It is important to note that once the prescribed pre-deposit is done, an automatic stay will be granted, under the GST law, for the remaining amount.

Pre-deposit provisions are to be satisfied while filing an appeal before both the first appellate authority and tribunal. Both the provisions are briefly explained in the present article.

Pre-deposit provisions as covered under GST law-

Provisions of section 107(6) of the Central Goods and Services Tax Act, 2017 (CGST Act) prescribes the mandatory pre-deposit condition to be satisfied by the appellant before filing an appeal before the First Appellate Authority. Accordingly, the appellant is required to make payment of the following pre-deposit payments arising out of the impugned order-

  • 100% of the tax, interest, fine, fee and penalty admitted by the appellant; and
  • 10% of the remaining amount of disputed tax, subject to a maximum of INR 25 Crores.

However, provisions of section 112(8) of the CGST Act prescribes the mandatory pre-deposit condition to be satisfied by the applicant before filing an appeal to the Tribunal. Accordingly, the applicant is required to make the payment of the following amount as pre-deposit-

  • 100% of the tax, interest, fine, fee and penalty admitted by the appellant; and
  • 20% of the remaining amount of disputed tax, subject to a maximum of INR 50 Crores.

Mode of payment of pre-deposit-

There are two modes of payments available under GST i.e., ‘Electronic Cash Ledger’ and ‘Electronic Credit Ledger’. However, there is a lot of confusion with regard to the mode of payment of pre-deposit. Analysis of the same is briefed hereunder-

Provisions of section 49 of the CGST Act deal with the payment of taxes under GST. According to section 49(3), ‘Electronic Cash Ledger’ can be used for making payment of tax, interest, fees, penalty or any other amount which is payable under the Act or Rules. Whereas, according to section 49(4), ‘Electronic Credit Ledger’ can be used for making payment of output tax only.

Payment of pre-deposit via ‘Electronic Cash Ledger’ is very clear. However, a contradictory view prevails for payment of pre-deposit via ‘Electronic Credit Ledger’. Some of the judgements and circulars covering the said contradiction are highlighted hereunder-

  • In the matter of M/s. Jyoti Construction Vs. Deputy Commissioner of CT & GST, Barbil Circle, Jaipur and another, Orissa High Court has held that pre-deposit amount payable as per section 107(6) cannot be debited/ paid via ‘Electronic Credit Ledger’.
  • In the matter of M/s. Dell International Services India Pvt. Ltd. Vs. Commissioner of Central Excise, Customs and Service Tax Bangalore, CESTAT Bangalore has held that pre-deposit amount can be debited via ‘Electronic Credit Ledger’.
  • Customs, Excise and Service Tax Appellate Tribunal, vide circular no. F. No. 15/CESTAT/General/2013-14 dated 28th August 2014, has clarified that appeal should be registered in case the pre-deposit is done via ‘Electronic Credit Ledger’.
  • Vide circular no. 42/16/2018-GST dated 13th April 2018, Central Board of Indirect Taxes and Customs has clarified that Cenvat credit of excise / service tax wrongly carried forward under GST shall be recovered as ‘central tax liability’. The same can be paid through both the modes i.e. ‘Electronic Cash Ledger’ or ‘Electronic Credit Ledger’.

Thus, even though as per High Court Judgment payment of pre-deposit via ‘Electronic Credit Ledger’ is not permissible. CESTAT judgment as well as various circular support the same.

Post by poonamgandhi

CA Poonam Gandhi is a Chartered Accountant and a Lawyer. With a wide practice experience and deep understanding of different laws and taxes, she has been an independent professional writer in the field of taxation, finance and laws.