Introduction
GST is now reaching a stage where the law, the portal and taxpayer rights are all intersecting. Three developments need serious attention.
First, the proposal to protect bona fide buyers from losing ITC merely because the supplier has defaulted in depositing tax. The press report states that the GST Council’s law committee has cleared a proposal under which buyer’s ITC may be protected where the invoice is reflected in GSTR-2B and the buyer proves payment, including GST, through banking channels or other prescribed documents. However, the report also says that the GST Council has to take the final call.
Second, GSTAT has introduced a token mechanism to record intent to file appeal before the due date. As per Order No. 156/2026, if token is obtained on or before 31 July 2026, it will be treated as sufficient compliance for filing appeals within due date, and the appeal can be completed within 60 days from token generation.
Third, there is a practical portal issue. When appeal filing fee is paid on GSTAT portal, many times payment status shows as “processing”. The portal message reportedly gives a 72-hour window and says that if payment is not processed within 72 hours, filing may be allowed and deficiency may be corrected at scrutiny stage. This is a good administrative gesture. But if this happens on the last day of limitation or the last day of token validity, the 72-hour waiting period itself may defeat the right of appeal.
These three issues are separate, but two of them are directly linked to GSTAT filing and access to appellate remedy.
Issue 1 — Buyer’s ITC where Supplier Defaults
Present legal position
Section 16(2)(c) of the CGST Act provides that ITC is subject to the condition that tax charged in respect of the supply has been actually paid to the Government, either in cash or through utilisation of admissible ITC.
This makes the buyer’s ITC dependent not only on buyer-side conduct, but also on supplier-side tax payment.
As per the structure of Section 16: invoice possession, supplier reporting, receipt of goods/services, non-restriction under Section 38, actual payment of tax to Government, and filing of return under Section 39.
The hardship
A genuine buyer may have:
- Paid value plus GST to supplier.
- Received goods or services.
- Possessed tax invoice.
- Seen invoice reflected in GSTR-2B.
- Used the goods/services in business.
- Filed return properly.
- Still, if the supplier does not pay tax, the buyer may face reversal or denial of ITC. This is the core grievance.
Existing balancing mechanism
Section 41(2), as explained in the uploaded material, requires reversal of ITC where the supplier fails to pay tax, but allows re-availment when the supplier subsequently pays the tax. Rule 37A also gives procedural support for reversal and re-availment.
So, the law tries to protect revenue first and restore credit later. But practically, the buyer suffers cash-flow loss, interest exposure, litigation cost and uncertainty.
Proposed shift
The press report indicates a policy shift: protect the bona fide buyer if:
- Invoice is reported by supplier.
- Invoice appears in buyer’s GSTR-2B.
- Buyer proves payment including GST through banking channel or prescribed document.
- Recovery is pursued against defaulting supplier, not against genuine buyer.
This would be a major taxpayer-friendly correction, but it must be carefully drafted.
Suggested legal design
Flow Chart — Proposed ITC Protection
Supplier issues invoice
↓
Supplier reports invoice in GSTR-1/IFF
↓
Invoice appears in buyer’s GSTR-2B
↓
Buyer receives goods/services
↓
Buyer pays invoice value + GST through bank/prescribed mode
↓
Supplier fails to deposit tax
↓
Current position: Buyer’s ITC questioned under Section 16(2)(c)
↓
Proposed position: Buyer protected; recovery from defaulting supplier
Concerns in ITC protection proposal
The proposal is good, but these concerns must be addressed:
1. What is “bona fide buyer”?
Mere GSTR-2B reflection should not be treated as absolute proof. There must be commercial evidence of actual supply.
2. Fake invoice risk
If protection is given only on GSTR-2B plus bank payment, circular transactions and accommodation entries may increase.
3. Burden of proof
Section 155 places burden on the person claiming ITC. The buyer must maintain invoice, e-way bill, GR/LR, stock records, payment proof, contract, delivery proof and consumption/sale linkage.
4. Timing issue
Should protection apply if tax was unpaid only temporarily but later paid? Or only where department confirms supplier default?
5. Retrospective benefit
Existing litigations under Section 16(2)(c) should also be considered. Otherwise, one class of buyers will suffer while future buyers get protection.
6. GSTR-2B is not payment proof
GSTR-2B proves reporting, not actual tax payment by supplier.
7. Banking payment may not prove actual supply
Payment trail must be supported by business trail.
8. Recovery from supplier must be effective
If department simply protects buyer but cannot recover from supplier, revenue leakage may occur.
9. Rule 37A alignment
If buyer is protected, Rule 37A reversal mechanism will need careful alignment.
10. Supplier rating / warning system
Buyers need a real-time risk indicator to know whether supplier is compliant, without violating privacy or creating blacklisting without due process.
Issue 2 — GSTAT Token System
What the order says
The GSTAT Presidential Order states that the online e-filing portal for GSTAT appeals under Section 112 is functional and appeals are being filed from 24 September 2025 onwards. It further states that due date for filing appeals under Section 112(1) and 112(3) was extended up to 31 July 2026.
The Order introduces a token mechanism. An appellant may record intent to file appeal on or before 31 July 2026 by submitting bare minimum details and obtaining a token. The appeal can then be completed within 60 days from token generation.
The advisory further says that separate token is required for each appeal, token generated on or before 31 July 2026 will serve as evidence that the user attempted to initiate appeal filing before the prescribed date, and appeal completed within 60 days alone will be treated as validly filed within due date.
The advisory also cautions that token lapses after 60 days and tokens with incomplete or inaccurate details may be treated as void.
Why this is welcome
The token system recognises one important principle:
A taxpayer should not lose statutory appeal merely because the portal is unable to accept complete filing.
This is a progressive step. It creates digital evidence of intent. It avoids unnecessary delay-fee disputes. It gives time to complete filing where technical issues exist.
Concerns in token system
1. Token is not appeal filing
It records intent. Actual appeal still has to be completed within 60 days.
2. Wrong token details may be fatal
If ARN, order number, tax period or GSTIN is wrong, token may be treated as void.
3. One token per appeal
Taxpayers having multiple orders must generate separate tokens. One token cannot cover multiple appeals.
4. 60-day hard stop
If portal glitches continue or payment fails near the end of 60 days, taxpayer may again be exposed.
5. No clarity on holidays and downtime
If the last token day is affected by scheduled maintenance, bank holiday, server failure or payment gateway issue, relief should be automatic.
6. Token should be linked with filing draft
If taxpayer has uploaded appeal documents but is blocked only at fee/payment stage, token should not lapse.
7. Registry scrutiny should not become limitation scrutiny
Defects should be curable. Defect correction should not convert a timely appeal into a delayed appeal.
Issue 3 — GSTAT Appeal Fee Payment Processing for 72 Hours
Legal background
Rule 110 deals with appeal to Appellate Tribunal in FORM GST APL-05. Law states that appeal is to be filed electronically with documents and provisional acknowledgement is issued immediately. Final acknowledgement is issued after removal of defects. The date of provisional acknowledgement is considered the date of filing where conditions are satisfied.
Rule 110 also prescribes appeal fee. The fee is ₹1,000 for every ₹1 lakh of tax or ITC involved or difference in tax/ITC, fine, fee or penalty, subject to maximum ₹25,000 and minimum ₹5,000; for orders not involving demand of tax, interest, fine, fee or penalty, fee is ₹5,000.
The problem arises where the taxpayer has paid the fee, but portal keeps the payment in “processing” status.
The practical difficulty
Suppose token expires today.
The appellant has prepared appeal.
Documents are ready.
Pre-deposit is paid.
Appeal fee is paid through portal.
Bank account is debited.
But GSTAT portal says: “payment processing”.
Filing tab is not activated.
Portal says wait up to 72 hours.
In this situation, the taxpayer has complied. The delay is not attributable to him. But technically he cannot file within the token period.
This converts a payment gateway issue into a limitation issue.
That should not happen.
Flow Chart — Present Problem
Appeal ready
↓
Fee paid on GSTAT portal
↓
Bank debited / payment initiated
↓
Portal shows “processing”
↓
Filing tab not activated
↓
72-hour waiting period
↓
Last date/token expires
↓
Taxpayer exposed to limitation dispute
Suggested Solution
Core principle
Where payment is initiated before limitation/token expiry,
portal delay should not defeat filing.
Practical portal solution
The GSTAT portal should immediately allow filing on the basis of:
Payment Reference Number,
Bank Transaction ID,
Challan ID,
Payment gateway response,
Screenshot of debit/payment initiation,
System-generated payment attempt timestamp.
The appeal may be marked:
“Filed subject to payment realisation / registry verification”
Deficiency, if any, can be cured at scrutiny stage.
Suggested filing model
Payment initiated before deadline
↓
Portal captures timestamp + transaction reference
↓
Filing tab opens immediately
↓
APL-05 filed with payment reference
↓
Provisional acknowledgement generated
↓
Registry verifies payment later
↓
If payment failed: defect memo/top-up opportunity
↓
No limitation prejudice
Specific recommendations
1. Payment attempt should unlock filing
Filing should not wait for bank settlement.
2. 72-hour window should be taxpayer-protective
The 72-hour window should not block filing. It should protect taxpayer from defect, not create a new defect.
3. Automatic extension where payment is pending
If fee was initiated before expiry, token validity should automatically extend until payment status is resolved plus reasonable time.
4. Manual filing backup
Registrar should issue general order permitting manual/email filing where portal/payment gateway prevents filing near limitation.
5. Defect memo instead of rejection
If payment ultimately fails, Registrar may issue defect memo and allow fresh payment within specified time.
6. No delay fee where payment attempt was timely
Delay fee should not apply when payment was initiated before due date/token expiry.
7. Audit trail must be downloadable
Portal should generate “Payment Processing Certificate” with date, time, GSTIN, appeal reference and transaction ID.
8. Helpline ticket should freeze limitation
A grievance ticket raised before expiry should become part of appeal record.
More Concerns Arising from 72-Hour Fee Processing
1. Right of appeal may become portal-dependent
The right to appeal is statutory. It should not be lost because a payment gateway does not return confirmation.
2. Pre-deposit and fee are different
A taxpayer may have paid statutory pre-deposit, but if appeal fee is stuck, appeal may not move. This can also create recovery exposure despite taxpayer’s intention to appeal.
3. Final acknowledgement problem
If portal does not allow filing, no provisional acknowledgement is generated. Without provisional acknowledgement, the taxpayer may later be forced to prove that he attempted filing.
4. Token protection may become incomplete
The token protects initial intent. But if actual filing within 60 days is blocked by fee-processing status, token relief becomes ineffective.
5. Double payment risk
Taxpayer may pay again to save limitation. Later both payments may get settled, leading to refund/accounting difficulty.
6.Bank reversal delay
If first payment fails, bank reversal may take time. Small taxpayers may not have immediate liquidity to pay again.
7. Wrong fee computation risk
Where demand involves tax, ITC, penalty or non-demand order, fee computation itself may become an issue. Portal should allow filing and let Registrar scrutinise fee.
8. Midnight filing risk
Many taxpayers file near midnight. A payment stuck at 11:30 PM on last day can destroy the appeal right.
9. Holiday/weekend risk
If 72 hours include Saturday, Sunday or bank holiday, payment resolution may be delayed beyond limitation.
10. Discrimination between taxpayers
One taxpayer whose bank response is instant can file. Another taxpayer using another bank may be blocked. This creates unequal treatment for the same legal right.
Linking the Two GSTAT Issues
The token system and the 72-hour payment issue must be read together.
The token system says:
Intent filed before due date → complete appeal within 60 days.
The fee-processing issue says:
Payment made but status pending → wait up to 72 hours.
The conflict is:
What if 72 hours fall beyond the 60th day?
In such a case, the taxpayer is not sleeping over his rights. He has prepared appeal and paid fee. The portal is not allowing filing. Therefore, GSTAT must treat payment initiation before token expiry as sufficient compliance.
Otherwise, the token system will solve one portal problem but create another.
Conclusion
The ITC proposal, GSTAT token system and GSTAT fee-processing issue show a common theme: GST administration is moving from rigid technical compliance towards evidence-based fairness.
For ITC, if the buyer has invoice, GSTR-2B reflection, receipt of goods/services and banking payment proof, then supplier default should ordinarily be recovered from supplier, not from genuine buyer.
For GSTAT, if the taxpayer has generated token and completed all steps within time, then portal/payment gateway delay should not defeat the appeal.
The law must protect revenue. But it must also protect the honest taxpayer who has done everything within his control.
The correct approach is:
Punish fake transactions.
Recover from defaulting suppliers.
Protect bona fide buyers.
Accept timely appeal attempts.
Do not let portal delays defeat statutory remedies.
*****
Speaker Introduction: CA Rajender Arora is a Chartered Accountant having more than 24 years of professional experience in GST, indirect tax advisory, litigation, research, training and capacity building. He is a noted GST faculty, speaker and consultant, known for practical interpretation of GST law with statutory basis, litigation perspective and taxpayer-side concerns.
Disclaimer: This article is for professional discussion, academic analysis and policy debate. It is based on the uploaded GSTAT Presidential Order/advisory, uploaded GST law material, and the press report shared by the user. The ITC protection issue is presently discussed as a proposal, not as enacted law, unless and until approved by the GST Council and implemented through proper legislative or delegated-law mechanism. Readers should verify the latest statutory position, portal advisories and case-specific facts before taking any filing or litigation decision.
