In a landmark and precedent-setting judgment, the Hon’ble Supreme Court of India has upheld the decision of the Gujarat High Court, thereby confirming that taxpayers may utilize the balance available in their Electronic Credit Ledger (ECL) for making the mandatory pre-deposit under Section 107(6) of the Central Goods and Services Tax (CGST) Act, 2017. This judgment marks a significant advancement in the interpretation of GST provisions and is poised to bring considerable relief to registered persons across the country.
Background: Statutory Framework of Pre-Deposit under GST
Under the CGST Act, 2017, a person aggrieved by an adjudication order is entitled to file an appeal before the appellate authority. However, in order to do so, the appellant is required to make a mandatory pre-deposit of 10% of the disputed amount of tax, as stipulated under Section 107(6) of the Act. Until now, administrative practice and system constraints mandated that such pre-deposits be made exclusively through the Electronic Cash Ledger, even in instances where substantial unutilized Input Tax Credit (ITC) was available in the Electronic Credit Ledger.
This restriction, lacking express statutory backing, led to significant financial strain on businesses by compelling them to block additional working capital in cash despite having already accumulated credits eligible for offsetting GST liabilities.
Gujarat High Court's Decision: ITC Recognized as 'Amount'
In a significant ruling, the Gujarat High Court examined the definition and scope of the term “amount” under Section 107(6) of the CGST Act. The Court held that there exists no express legislative bar prohibiting the use of ITC for the purpose of pre-deposit. It further ruled that ITC, being a recognized mode of discharging tax liability under the GST regime, qualifies as “amount” for the purposes of pre-deposit.
Accordingly, the High Court concluded that assessees are entitled to use the balance available in the Electronic Credit Ledger to meet the mandatory pre-deposit condition required for the filing of appeals.
Supreme Court’s Verdict: Upholding the Taxpayer’s Right
The matter was taken to the Hon’ble Supreme Court, which on May 19, 2025, delivered its judgment affirming the Gujarat High Court’s interpretation. The apex court observed that the right to avail ITC is a vested and statutory entitlement under the GST law. Consequently, any administrative or procedural constraint that prevents its utilization for purposes like pre-deposit cannot be upheld unless explicitly mandated by law.
The Court clarified that the statutory language under Section 107(6) does not distinguish between cash and credit ledgers with respect to the payment of the pre-deposit and therefore, utilization of ITC from the ECL should be permissible, provided the amount is available and appropriately debited.
This judgment reinforces the principle that substantive tax rights cannot be curtailed through procedural rigidity, especially where the legislation is silent on such restrictions.
