Summary: CBIC Circular No. 259/05/2026-GST dated 26 October 2026 clarifies six important issues concerning mandatory pre-deposits under Sections 107(6) and 112(8) of the GST law. It explains that the appellant determines the admitted and disputed portions of a tax demand while filing an appeal, with the admitted liability payable in full and the prescribed pre-deposit calculated on the disputed tax. Where the first appellate authority reduces the demand, the additional tribunal pre-deposit is calculated on the reduced amount that remains contested. The circular further clarifies that a favourable appellate order need not expressly direct refund of the pre-deposit and that a proposed or pending departmental appeal cannot justify withholding the refund unless the order has been stayed. Interest under Section 115 runs separately from the date of each pre-deposit payment. It also addresses refunds following complete or partial remand by the tribunal, including adjustment of confirmed liabilities. These clarifications provide practical guidance on appeal filing, refund claims, interest calculations and protection against unnecessary delays in releasing taxpayers’ funds.
Introduction
The pre deposit provisions in Sections 107(6) and 112(8) are short, but they have generated a surprising amount of disagreement in the field. What exactly is the admitted amount. If the first appellate authority reduces the demand, is the tribunal pre deposit ten percent of the original figure or the reduced one. Does the taxpayer have to wait for the department’s appeal to be decided before the pre deposit comes back. Circular No. 259/05/2026 GST dated 26.10.2026 answers six such questions in a tabular form, and most of the answers favour the taxpayer.
Admitted amount and tax in dispute
Section 107(6) requires the appellant to pay in full the admitted part of the tax, interest, fine, fee and penalty arising from the order, plus ten percent of the remaining tax in dispute. Section 112(8) says the same for the tribunal, in addition to what was paid at the first appeal stage. The circular clarifies that the admitted amount is whatever portion of the liability the taxpayer acknowledges as payable and does not intend to challenge. It must be paid in full before the appeal is filed. Everything else that the taxpayer contests is the tax in dispute, and the ten percent is computed on the tax component of that disputed portion.
The important sentence is the last one in that clarification. The decision whether to treat an amount as admitted or disputed is to be made by the taxpayer at the time of filing the appeal, and it is captured in Table 14 of APL 01 and Table 20 of APL 05. In other words the department cannot insist that some part of the demand is admitted merely because the taxpayer did not argue it strongly in the reply. The choice belongs to the appellant and is recorded in the form.
Tribunal pre deposit after a modified order
This was a live question in several matters where the first appellate authority had partly allowed the appeal. The circular says that for an appeal to the tribunal, the ten percent of the remaining tax in dispute is to be computed with reference to the liability confirmed by the Appellate Authority which the appellant disputes. If the adjudicating authority confirmed one crore and the Appellate Authority reduced it to forty lakhs, the tribunal pre deposit is ten percent of the forty lakhs that is still contested, not ten percent of the original one crore. The amount already paid at the first appeal stage remains with the department as the statute requires, but the fresh deposit is on the reduced figure.
The order need not say refund the pre deposit
Some field formations had been refusing refund of pre deposit on the ground that the appellate order did not specifically direct it. The circular puts an end to that. When a pre deposit becomes refundable as a consequence of an appellate or tribunal order, the order does not have to say so in terms. The taxpayer files a refund claim under serial number 7 of RFD 01, on account of order, and the refund follows.
Department’s further appeal is no ground to withhold refund
This is the most useful clarification in the circular. Where the taxpayer succeeds before the Appellate Authority or the tribunal and applies for refund of pre deposit, the taxpayer is entitled to it. If the department is contemplating or has even filed a further appeal against that order, the refund is still payable unless the order has actually been stayed by the tribunal or a court. The circular says in plain words that refund should not be denied merely because the department intends to appeal or has appealed. In practice refunds of pre deposit have been kept pending for months on a vague reference to a proposed departmental appeal. Those files can now be reopened with this circular attached.
Interest runs from each payment separately
Section 115 provides for interest on refund of pre deposit from the date of payment. Where pre deposit was made at both levels, first under Section 107(6) and again under Section 112(8), and the tribunal finally decides in the taxpayer’s favour, interest on each deposit runs from the date that particular deposit was made. The two amounts are not clubbed and dated from the later payment.
Refund when the tribunal remands
Where the tribunal remands the matter to the adjudicating authority, the taxpayer is eligible for refund of the pre deposit and it is to be granted within the prescribed time. Where the remand is partial and part of the demand is upheld, the department will first recover or adjust the confirmed portion along with interest against the pre deposit and refund the balance. This second part is a sensible safeguard, but taxpayers should check the arithmetic in such adjustments carefully since the confirmed portion will often be a fraction of the total deposit.
Why this matters
Pre deposit is money that sits with the department for years while an appeal is heard. The GST Appellate Tribunal benches have only recently started functioning in our State and a large number of second appeals are being filed now. The question of how much to deposit, on what figure, and when it comes back is therefore not academic. This circular gives a clear statutory reading on each point and, importantly, removes two excuses that were routinely used to delay refunds, namely the silence of the appellate order and the pendency of a departmental appeal.
For practitioners the practical steps are simple. Fill Table 14 of APL 01 and Table 20 of APL 05 deliberately, because that is where the admitted and disputed split is fixed. When filing before the tribunal after a partly successful first appeal, compute the ten percent on the amount confirmed by the Appellate Authority. When a favourable order comes, file RFD 01 under the category on account of order without waiting for anything further, and if the refund is held back on the ground of a proposed departmental appeal, cite serial number 4 of this circular. Interest under Section 115 should be claimed from the actual date of each deposit.
