In a significant judgment, the Supreme Court of India has upheld the Gujarat High Court's decision in Yasho Industries Ltd. vs. Union of India, allowing taxpayers to discharge the mandatory 10% pre-deposit for filing GST appeals through their Electronic Credit Ledger (ECL) using available Input Tax Credit (ITC).
Rejecting the Revenue’s challenge, the Court confirmed that payment made via Form GST DRC-03 using ITC constitutes valid compliance under Section 107(6)(b) of the CGST Act, 2017.
Legal Outcome
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Use of ITC via the ECL is permissible for the 10% pre-deposit required at the first appellate stage.
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DRC-03 filing is a valid mechanism to effect such payment.
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The Court emphasized no statutory bar against using credit for pre-deposit, reinforcing a liberal and purposive interpretation of GST provisions.
Implications for Taxpayers
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Eases working capital pressure, especially for MSMEs and exporters.
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Removes ambiguity around the mode of pre-deposit payment.
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Eliminates the need for cash outflows during litigation, ensuring better liquidity.
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Simplifies appellate proceedings and avoids refund-related complexities if the appeal is allowed.
