Pre-Deposit under GST | Concept, Payment, Recovery Proceedings & Interest

1. Introduction

The right to appeal is a statutory right which operates within the limitations placed on it by the law. One such limitation flows from the principle that an appellant must first deposit the certain percentage of disputed amount before filing the appeal. The basic purpose is that only genuine appeal will be filed and unnecessary adjudication to delay the demand will be avoided.

2. Concept of Mandatory Pre-Deposit under GST

Under GST, there is also requirement of pre-deposit before filing the appeal. The appeal shall not be admitted unless the pre-deposit is made by the appellant. It is noteworthy that only pre-deposit of specified percentage of disputed tax amount is to be made and no requirement to pre-deposit any percentage of disputed interest or penalty. The pre-deposit which shall be made is as follows:

2.1. Appeal before First Appellate Authority

The person making an appeal before Appellate Authority should pre-deposit full amount of tax, interest, fine, fee and penalty that is arising from the order of adjudicating authority and is accepted by him and 10% of the remaining amount of tax which is in dispute (subject to maximum of 50 crores) arising from the order against which appeal is to be filed.

2.2. Appeal before Tribunal

The person making an appeal before tribunal should pre-deposit full amount of tax, interest, fine, fee and penalty that is arising from the order of appellate authority and is accepted by him and 20% of the remaining amount of tax which is in dispute (subject to maximum of 100 crores) arising from the order against which appeal is to be filed. The above said amount should be in addition to the amount paid at the time of filing appeal to authority.

3. Payment of Pre-Deposit

The GST law provides that the balance available in the Electronic Credit Ledger shall be used for making the payment against output tax liability only. Therefore, the pre-deposit must be made through cash ledger only. Recently, the Orissa High Court in case of Jyoti Construction v. Deputy Commissioner of CT & GST, Jajpur [2021] 131 taxmann.com 104 (Orissa) has also held that output Tax could not be equated to pre-deposit required to be made. Therefore, electronic credit ledger cannot be debited for making payment of pre-deposit at the time of filing of the appeal.

4. Stay on recovery proceedings after pre-deposit

If the appellant has paid the pre-deposit amount then the recovery proceedings for the balance amount shall be deemed to be stayed till the disposal of the appeal.

5. Interest on pre-deposit

If the pre-deposit amount paid by the appellant is required to be refunded consequent to any order of the Appellate Authority or of the Appellate Tribunal then interest at the rate of 9% shall be payable in respect of such refund from the date of payment of the amount till the date of refund of such amount.