The Tax Publishers

Utilization of Electronic Credit Ledger for Making Pre-Deposit Under Section 107(6)--Allowability of

S.D. Purohit

The present write-up examines an important issue as to whether Electronic Credit Ledger can be utilized for making pre-deposit of 10% of disputed demand in terms of sub-section (6) of section 107 of the Central Goods and Services Tax Act, 2017).

1. Provisions relating to making pre-deposit under section 107(6)

Section 107 of the Central Goods and Services Tax Act, 2017 (in short "the CGST Act") deals with appeals to Appellate Authority. As per sub-section (1) of section 107 of the CGST Act, any person aggrieved by any decision or order passed under this Act or the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act by an adjudicating authority may appeal to such Appellate Authority as may be prescribed within three months from the date on which the said decision or order is communicated to such person.

Sub-section (6) of section 107 requires making of pre-deposit for filing appeal. Accordingly, the appeal to Appellate Authority shall not be filed, unless the appellant has paid --

(a) in full, such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by him; and

(b) a sum equal to ten per cent. of the remaining amount of tax in dispute arising from the said order subject to a maximum of twenty-five crore rupees, in relation to which the appeal has been filed.

Where appeal is to be filed against an order under sub-section (3) of section 129, the appellant is required to make pre-deposit of 25% of the penalty.

2. Payment of tax, interest, penalty and other amounts under the GST law

Section 49 of the CGST Act deals with payment of tax, interest, penalty and other amounts. As per sub-section (3) of section 49 of the CGST Act, the amount available in the electronic cash ledger may be used for making any payment towards tax, interest, penalty, fees or any other amount payable under the provisions of this Act or the rules made thereunder in such manner and subject to such conditions and within such time as may be prescribed.

Sub-section (4) of section 49 of the CGST Act provides that the amount available in the electronic credit ledger may be used for making any payment towards output tax under the Act or under the Integrated Goods and Services Tax Act in such manner and subject to such conditions and restrictions and within such time as may be prescribed.

As per clause (82) of section 2 of the CGST Act, "output tax" in relation to a taxable person, means the tax chargeable under the Act on taxable supply of goods or services or both made by him or by his agent but excludes tax payable by him on reverse charge basis.

Sub-rule (2) of rule 86 of the CGST Rules provides that the electronic credit ledger shall be debited to the extent of discharge of any liability in accordance with the provisions of section 49 or section 49A and section 49B.

The provisions in respect of section 49 are discussed above. Section 49A deals with utilization of input tax credit subject to certain conditions and section 49B deals with order of utilization of input tax credit.

In this regard, an issue arises for consideration as to whether pre-deposit of tax under sub-section (6) of section 107 can be regarded as "output tax" and whether the Electronic Credit Ledger (ECRL) can be utilized for making payment of pre-deposit under sub-section (6) of section 107 of the Act.

3. Orissa High Court decision in Jyoti Construction in favour of revenue

In the case of Jyoti Construction v. Deputy Commissioner of CT & GST, [Writ Petition (C) Nos. 23508, 23511, 3513, 23514 and 23521 of 2021 decided on 7-10-2021, the issue arose for consideration before the Orissa High Court as to whether Electronic Credit Ledger can be utilized for making pre-deposit of 10% of the disputed tax in terms of sub-section (6) of section 107 of the CGST Act.

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