- The Supreme Court ruled that the 10 percent pre-deposit for appeals under the CGST Act can be paid using Input Tax Credit from the Electronic Credit Ledger.
- This decision resolves procedural ambiguity, restores liquidity, and upholds the legislative intent that credit is a right, not a concession.
- Previously, there was confusion due to lack of clarity on payment methods for the pre-deposit, affecting businesses with idle ITC balances.
- Circular No. 172/04/2022-GST suggested ITC could only be used for output tax, leading to cash-only compliance for pre-deposits.
- The department argued pre-deposits are not output tax, but the court recognized them as conditional part-payments of the tax under appeal.
- The Gujarat High Court emphasized a credit-based GST regime and ruled against denying ITC use for pre-deposits, aligning with GST’s foundational principles.
Source: mondaq.com
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
