Amount debited to Electronic Cash Ledger is equivalent to Government deposit and GST DRC-03 not mandatory
The Gujarat High Court ruled in Superintendent AE v. Virbhadrasinh Pratapsinh Chauhan Anr. that an amount deposited by an assessee into their Electronic Cash Ledger (ECL) to meet a bail condition of tax deposit is considered equivalent to a deposit with the Government, thus fulfilling the bail requirement. The Revenue sought to cancel the bail, arguing that the deposit was invalid because the assessee had not formally debited the amount using Form GST DRC-03, claiming this failure meant the funds could still be utilized or refunded by the accused. The Court observed that under Section 49 of the CGST Act, funds credited to the ECL are deemed to have been deposited into the Government’s account. It concluded that DRC-03 is an accounting formality for adjusting a tax liability and is not mandatory for establishing a bona fide deposit. Insisting on DRC-03 would prejudice the taxpayer’s right to appeal, and since the funds were provably with the Government, the bail cancellation application was rejected.
Facts:
Virbhadrasinh Pratapsinh Chauhan (“the Petitioner”), accused in a GST evasion offense, was released on bail by the High Court with the condition to deposit Rs. 90 lakhs with the Government within seven days. The Respondent, Superintendent AE (“the Respondent”), sought cancellation of bail, arguing that the amount was credited only to the company’s ECL (not through DRC-03), so actual deposit to the Government did not occur and the accused could still utilize/refund the amount.
The Petitioner produced documentary evidence showing withdrawal of Rs. 90 lakhs from his bank and credit into the ECL, apportioned correctly between CGST and SGST. He argued that credit in ECL is actual payment to Government under Section 49 and relevant rules: once deposited in the ECL, funds stand with Government, and GST DRC-03 is not needed.
The Respondent contended only DRC-03 debit constitutes “payment” under GST, and credit in ECL could be withdrawn or transferred, defeating the bail condition.
After considering rival submissions, the Petitioner’s grievance was that a rigid technical insistence on DRC-03 would prejudice substantive rights and was unwarranted where actual funds lay with the Government and a suitable undertaking not to use/refund the funds was given.
Issue:
Whether crediting the required sum to the government’s account via the Electronic Cash Ledger fulfils the bail condition for deposit, as opposed to debit via Form GST DRC-03 and if compliance is established by such means?
Held:
The Hon’ble Gujarat High Court in R. Criminal Misc. Application No. 20070 of 2024 held as under:
- Observed that, Section 49 CGST Act and Explanation therein state: “the date of credit to the account of the Government in the authorized bank shall be deemed to be the date of deposit in the electronic cash ledger.”
- Noted that, credit to ECL with challan is deemed credited to Government account, and DRC-03 is only an accounting formality for set-off of liability.
- Held that, once the amount is credited in the Government’s account, tax liability stands discharged on that date; interest liability does not arise between deposit and ledger debit.
- Further held that bail cancellation must meet higher criteria and rejected Revenue’s application for bail cancellation and discharged notice.
Our Comments:
This ruling harmonizes the law on payment of tax under GST with regard to both substantive compliance and form. The Gujarat High Court reaffirmed that funds credited to the Electronic Cash Ledger, properly apportioned with supporting challans, are Government deposits for all legal purposes under Section 49 CGST Act—even without DRC-03 debit/acknowledgment. “Payment” is thus a matter of substance, not empty formality, and the Petitioner’s right to preserve challenges on appeal is protected. This aligns squarely with the decision by this court in Arya Cotton Industries v. Union of India [R/SPECIAL CIVIL APPLICATION NO. 8871 of 2022] of Gujarat High Court, which held that ECL credits fulfil statutory “payment” obligations, and no additional interest or compliance is required from deposit to set-off.
Relevant Provision:
Section 49 of the CGST Act, 2017:
“49. Payment of tax, interest, penalty and other amounts.-
(1) Every deposit made towards tax, interest, penalty, fee or any other amount by a person by internet banking or by using credit or debit cards or National Electronic Fund Transfer or Real Time Gross Settlement or by such other mode and subject to such conditions and restrictions as may be prescribed, shall be credited to the electronic cash ledger of such person to be maintained in such manner as may be prescribed.
(2) The input tax credit as self-assessed in the return of a registered person shall be credited to his electronic credit ledger, in accordance with section 41, to be maintained in such manner as may be prescribed.
(3) 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.
(4) The amount available in the electronic credit ledger may be used for making any payment towards output tax under this Act or under the Integrated Goods and Services Tax Act in such manner and subject to such conditions and restrictions within such time as may be prescribed.
(5) The amount of input tax credit available in the electronic credit ledger of the registered person on account of-
(a) integrated tax shall first be utilised towards payment of integrated tax and the amount remaining, if any, may be utilised towards the payment of central tax and State tax, or as the case may be, Union territory tax, in that order;
(b) the central tax shall first be utilised towards payment of central tax and the amount remaining, if any, may be utilised towards the payment of integrated tax;
(c) the State tax shall first be utilised towards payment of State tax and the amount remaining, if any, may be utilised towards payment of integrated tax..”
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(Author can be reached at info@a2ztaxcorp.com)
Author Bio
With due respect to the author n the Hon’ble High Court.. I am of the opinion that debit in cash ledger for a particular purpose satisfy the condition. I mean credit to cash ledger is puting money into one’s pocket. That money can be utilised in no. of ways such as paying for Electricity bills vegitables or for travel etc.
Under GST DRC-03 is form n showing utilisation for a particular purpose can be specified unambiguously.
The Hon’ble HC could have have directed the person to debit in cadh ledger n reflect purpose in DRC-03. I feel mere credit into Cash ledger is not full compliance
I mean credit to