Can payment of pre-deposit for filing of an appeal be made through Electronic Credit Ledger – After amendment proposed in Finance Bill 2022.
In this regard I would like to first make a reference to the relevant provisions of the CGST Act, 2017 and CGST Rules, 2017:
Section 2(82) of the CGST Act, 2017:
“Output tax in relation to a taxable person, means the tax chargeable under this 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”
Section 49(4) of the CGST Act, 2017:
“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 within such time as may be prescribed.”
Hence, according, to Section 49(4) of the CGST Act, the amount available in the electronic credit ledger can be used for making any payment towards output tax and not just self-assessed output tax.
Rule 85(3) and 85(4) of the CGST Rules:
“85(3) Subject to the provisions of section 49, [section 49A and section 49B], payment of every liability by a registered person as per his return shall be made by debiting the electronic credit ledger maintained as per rule 86 or the electronic cash ledger maintained as per rule 87 and the electronic liability register shall be credited accordingly.
(4) The amount deducted under section 51, or the amount collected under section 52, or the amount payable on reverse charge basis, or the amount payable under section 10, any amount payable towards interest, penalty, fee or any other amount under the Act shall be paid by debiting the electronic cash ledger maintained as per rule 87 and the electronic liability register shall be credited accordingly.”
Rule 85(3) specifically states that the payment of every liability can be made by debiting the electronic credit ledger and Rule 85(4) states the specific liabilities which shall be paid by debiting the electronic cash ledger only which no-where includes payment of tax as pre-deposit for filing of an appeal.
Section 41 of the CGST Act (Old provision)
“41. Claim of input tax credit and provisional acceptance thereof.—
(1) Every registered person shall, subject to such conditions and restrictions as may be prescribed, be entitled to take the credit of eligible input tax, as self-assessed, in his return and such amount shall be credited on a provisional basis to his electronic credit ledger.
(2) The credit referred to in sub-section (1) shall be utilised only for payment of self- assessed output tax as per the return referred to in the said sub-section.”
Section 41(Substitution with new Section 41 proposed vide Finance Bill, 2022):
AVAILMENT OF INPUT TAX CREDIT
“41. (1) Every registered person shall, subject to such conditions and restrictions as may be prescribed, be entitled to avail the credit of eligible input tax, as self-assessed, in his return and such amount shall be credited to his electronic credit ledger.
(2) The credit of input tax availed by a registered person under sub-section (1) in respect of such supplies of goods or services or both, the tax payable whereon has not been paid by the supplier, shall be reversed along with applicable interest, by the said person in such manner as may be prescribed:
Provided that where the said supplier makes payment of the tax payable in respect of the aforesaid supplies, the said registered person may re-avail the amount of credit reversed by him in such manner as may be prescribed.”.
As per the Old provision contained in Section 41, the credit could be utilized only for payment of self- assessed output tax as per the return but with the substitution proposed vide the Finance Bill, 2022 the restriction on availment only for payment of self-assessed output tax is done away with. Further, there is no other provision which restricts the payment of pre deposit for filing an appeal through electronic credit ledger.
In Jyoti Construction v. Deputy Commissioner of CT & GST, Barbil Circle, Jaipur and another- Orissa High Court in terms of Section 107 (6) of the OGST Act, the Petitioner was required to make payment equivalent to 10% of the disputed amount of tax arising from the order against which the appeal is filed. The petitioner sought to make payment of the pre-deposit by debiting the Electronic Credit Ledger. Considering this to be defective and liable for rejection of the appeal, a show cause notice (SCN) was issued which was upheld by the appellate authority as well. Being aggrieved against the order of the appellate authority a writ petition was filed before the Hon’ble High Court.
The Hon’ble High Court held that, “the proviso to Section 41 (2) of the OGST Act limits the usage to which the ECRL could be utilised. It cannot be debited for making payment of pre-deposit at the time of filing of the appeal in terms of Section 107 (6) of the OGST Act. It is not therefore possible to accept the pleaa Section 107 (6) of the OGST Act is merely a “machinery provision”.
The Hon’ble High Court further held that, “The Court is unable to find any error having been committed by the appellate authority in rejecting the Petitioner’s contention that the ECRL could be debited for the purposes of making the payment of pre-deposit.”
In the above-mentioned case, the Hon’ble High Court held that payment of pre-deposit cannot be made by debiting the electronic credit ledger in accordance with Section 41. Now, that Section 41 has been proposed to be substituted with a new Section 41 wherein the restriction on utilization of credit only for payment of self-assessed output tax is done away with, payment of pre-deposit through electronic credit ledger should be allowed as there is no other provision which puts any kind of restriction on such debit from electronic credit ledger.
Thus, in my view the judgement of Hon’ High Court would not be applicable from the date of implementation of the proposed amendment.
Author Bio
