Breaking: SC allows use of ITC for payment of mandatory pre-deposit under GST

The Gujarat High Court’s decision permitting the use of the Electronic Credit Ledger (ECL), which contains accumulated input tax credit (ITC), to make the mandatory pre-deposit required for filing an appeal under the Goods and Services Tax (GST) law was upheld by the Supreme Court on Monday, May 19, in a landmark decision that will have far-reaching effects on businesses throughout India.

Businesses have been demanding urgent attention from the government over the use of accumulated ITC for various payments under the GST regime, and this decision comes at a time when they have already been demanding improvements in the usage of ITC.

The Supreme Court today, in a matter between the Revenue Department and Yasho Industries, who are global manufacturers and suppliers of specialty and fine chemicals, dismissed the Special Leave Petition (SLP) filed by the Revenue Department, affirming that Section 107(6) of the CGST Act does not restrict the mode of pre-deposit payment to cash alone.

Mumbai-based Yasho manufactures performance chemicals for industries as diverse as rubber and latex, food and flavours, perfumery, lubricants and other specialty applications since 1993.

In a case involving the Revenue Department and Yasho Industries, a multinational manufacturer and supplier of speciality and fine chemicals, the Supreme Court today denied the Revenue Department’s Special Leave Petition (SLP), upholding the fact that Section 107(6) of the CGST Act does not limit pre-deposit payment methods to cash only.

Located in Mumbai Since 1993, Yasho has produced performance chemicals for a wide range of sectors, including lubricants, food and flavourings, rubber and latex, perfumes, and other specialised uses.

Final Order of Gujarat High Court

Considering the facts of the present case, the amount paid by the petitioner as pre- deposit in compliance of section 107(6)(b) of the CGST Act utilizing the amount of Electronic Credit Ledger is required to be considered valid and impugned letter dated 25.04.2023 issued by the respondent No.2 directing the petitioner to pay pre-deposit amount through Electronic Cash Ledger is therefore, hereby quashed and set aside. Therefore, the appeal filed by the petitioner is required to be heard on merits by considering the payment of predeposit by the petitioner from Electronic Credit Ledger as a sufficient compliance of the provisions of section 107(6)(b) of the CGST Act. The petition is accordingly disposed of. 

Download Order of the Gujarat High Court