In a major relief for businesses, the Supreme Court upholds the use of the Electronic Credit Ledger for the mandatory 10% GST appeal pre-deposit, easing cash flow challenges during litigation.
In a landmark judgment offering major relief to businesses across India, the Supreme Court has ruled that companies can use their Electronic Credit Ledger (ECL) to make the mandatory 10% pre-deposit required for filing an appeal under the Goods and Services Tax (GST) law.
This decision comes as the apex court upheld a Gujarat High Court ruling in the case of Yasho Industries vs Union of India. The High Court had earlier ruled in favor of the company, allowing the use of accumulated Input Tax Credit (ITC) in the ECL for appeal-related deposits.
A bench led by Justice B.V. Nagarathna dismissed the revenue department’s appeal and confirmed that making pre-deposit payments through the ECL constitutes valid and sufficient compliance under Section 107(6)(b) of the Central Goods and Services Tax (CGST) Act, 2017.
The Supreme Court’s ruling is particularly impactful for small and medium enterprises (SMEs), which often struggle with cash flow constraints during legal disputes with tax authorities.
Legal Expert Reacts
Abhishek A. Rastogi, counsel for Yasho Industries, welcomed the decision, saying:
“The Supreme Court’s verdict marks a major victory for taxpayers, particularly small and medium enterprises that frequently face cash flow challenges during litigation. By permitting the use of the Electronic Credit Ledger for mandatory pre-deposits, the ruling eases a significant financial burden and streamlines the appeals process by rejecting a narrow interpretation of the law. This ensures that taxpayers are no longer compelled to pay in cash when valid input tax credit is available.”
Why It Matters
This ruling sets a precedent and could have far-reaching implications for businesses engaged in tax disputes. By allowing the use of ITC for pre-deposits, the Supreme Court has effectively lowered a key financial barrier in the GST appellate process.