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Supreme Court Upholds Use of Input Tax Credit for GST Appeal Pre-Deposits: A Landmark Decision for Taxpayers

  • Writer: tax comply
    tax comply
  • 7 hours ago
  • 2 min read

In a significant relief for taxpayers across the country, the Supreme Court of India has upheld the Gujarat High Court’s landmark judgment in the case of M/s Yasho Industries Ltd. vs Union of India (dated 17 October 2024), allowing businesses to utilize the Input Tax Credit (ITC) from their Electronic Credit Ledger (ECL) to make the mandatory 10% pre-deposit while filing appeals under the Goods and Services Tax (GST) law.

This ruling, now endorsed at the highest judicial level, eliminates a major hurdle faced by businesses dealing with GST litigation.

Background: What Triggered the Dispute

Yasho Industries Ltd., a publicly listed company engaged in the export of specialty chemicals, faced a GST demand involving reversal of IGST refunds due to the retrospective application of Rule 96(10) of the CGST Rules. The company had duly filed an appeal against the tax demand and deposited ₹3.36 crore through Form GST DRC-03, debiting its Electronic Credit Ledger.

However, the department objected, stating that the pre-deposit should have been paid via the Electronic Cash Ledger, and issued a letter on 25 April 2023 rejecting the ITC-based payment.


Gujarat High Court's Landmark Decision

In its detailed judgment, the Gujarat High Court held that:

  • Section 107(6)(b) of the CGST Act requires a pre-deposit of 10% of the disputed tax amount to be paid before filing an appeal, but does not prescribe the mode of payment.

  • The CBIC Circular dated 6 July 2022 clarifies that payments towards output tax – whether self-assessed or arising from adjudication – can be made using ITC from the Electronic Credit Ledger.

  • The court emphasized that forcing taxpayers to pay via cash when sufficient ITC is available

Accordingly, the impugned letter directing cash payment was quashed, and the petitioner’s pre-deposit made through ITC was declared valid.


Supreme Court Upholds the Ruling

On 19 May 2025, the Supreme Court dismissed the Revenue’s appeal, affirming the Gujarat High Court’s view. The apex court bench, comprising Justice B.V. Nagarathna and Justice Satish Chandra Sharma, unequivocally upheld that ITC can be used for pre-deposit under GST appeals, sealing the issue in favor of taxpayers.


Conclusion

With the Supreme Court’s stamp of approval, the Gujarat High Court’s verdict in Yasho Industries Ltd. becomes a binding precedent across India. It marks a positive shift in GST litigation, reinforcing the principle of fair tax administration and empowering businesses to manage their tax liabilities more efficiently.

This is not just a win for Yasho Industries – it’s a win for every GST-registered business in India.


Please note that above article is written based on the article published in Business Standard and we understand the judgment is pronounced but final order yet to come.


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