No More Cash Block: Supreme Court Greenlights ITC for GST Appeal Deposits

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In a major relief for businesses and taxpayers across India, the Supreme Court has ruled that the mandatory pre-deposit required for filing GST appeals can now be made through the accumulated Input Tax Credit (ITC) in the Electronic Credit Ledger (ECL), rather than only in cash. This decision, delivered in the case of Yasho Industries vs Union of India, upholds the Gujarat High Court’s earlier verdict and dismisses the Revenue Department’s challenge.

Key Highlights:

What Has Changed: Taxpayers appealing against GST orders are required to make a pre-deposit of 10% of the disputed tax (up to ₹20 crore) before the First Appellate Authority, and an additional 10% for further appeals. Until now, authorities insisted this be paid in cash, creating cash flow challenges even for those with ample ITC balances
Supreme Court Ruling: The apex court confirmed that using ITC from the ECL for pre-deposit is valid and sufficient compliance under Section 107(6) of the CGST Act. The funds are already with the government, so using them does not affect revenue collection.

Who Benefits:

MSMEs and Exporters: Small businesses and exporters facing cash constraints during litigation will benefit most, as they can now preserve working capital.
Large Corporates: Companies with high ITC balances, including those in manufacturing and export sectors, will see improved liquidity.
Taxpayers with Pending Appeals: Those who previously paid cash for pre-deposits may explore refunds or adjustments.

Wider Impact:

Reduces Litigation: The judgment harmonizes conflicting interpretations, reducing legal disputes.
Eases Cash Flow: Businesses can pursue appeals without blocking cash, freeing up funds for operations.
Boosts Ease of Doing Business: The ruling aligns with GST’s technology-driven, taxpayer-friendly intent and strengthens access to justice.

This historic decision is expected to streamline the GST appellate process, provide immediate cash flow relief, and set a binding precedent for similar cases nationwide.

Sources: Economic Times, CNBC TV18, NDTV Profit, Hindu Business Line, VATUpdate

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