Court order affecting working capital of GST appealing businesses
New Delhi, October 16 (IANS) In what may affect the working capital of taxpayers considering appealing against GST claims, it had now been held that anyone seeking redress against an indirect tax ruling should make a pre-deposit in cash and not by debiting an electronic credit register.
Recently, the Bench Division of the High Court of Orissa ruled that the pre-filing when filing an appeal under Article 107 (6) of the Central Product Tax Act 2017 and services (CGST Law) cannot be carried out by debiting the electronic credit. General ledger (ECRL). The pre-deposit payment must be made by debiting the Electronic Cash Ledger (ECL) in accordance with Article 49 (3) of the CGST Law read with Rule 85 (4) of the Central Product Tax Rules and services, 2017 (CGST rules).
This is because this ordinance requires taxpayers to pay the pre-filing amount (i.e. 10 percent of the disputed tax) in cash by transferring money from the Electronic Ledger (ECL) for any dispute. tax raised by them. This would mean more cash outflows, leaving little room for working capital requirements.
In the event that this went to the High Court of Orissa, the revenues raised GST claims as well as interest on the petitioners, who were engaged in the performance of the works contract. The claimant filed an appeal and made an advance deposit payment (i.e. 10 percent of the disputed fee) for the appeal filing, using the ECRL balance. The tax authorities dismissed the appeal and considered it to be defective, pointing out that the responsibility for the pre-deposit can only be discharged by debiting ECL.
The petitioner’s claim was that any output tax payment can be made through ECRL. Since the pre-filing can be interpreted as a percentage of the output tax, it can be paid by debiting the ECRL.
The Ministry of Revenue argued that the CGST Act specifically provides that the ECRL can be used for the payment of output tax. However, the pre-deposit to be made cannot be equated with the output tax to be paid. The input tax credit can only be used to pay the “self-assessed output tax as declared”.
The High Court accepted this assertion and observed that the pre-filing cannot be equated with an “exit tax” and that the restriction in Section 41 (2) of the CGST Act limits the use of the register. credits to make a pre-deposit. . The High Court rejected the applicant’s contention that the provision of Section 107 (6) of the CGST Act was considered a “machinery provision”.
Accordingly, the decision of the Appeals Authority that the pre-filing cannot be made by debit from the ECRL was confirmed.
The petitioner claimed that he would make the payment by debiting the ECL, but that he should be allowed to reverse the debit from the ECL. The High Court observed that this was a separate cause of action for which the petitioner should independently seek an appropriate remedy. The Court ruled that the completion of a pre-deposit is not subject to the cancellation of the debit entry in the ECRL.
This is an important decision which categorically holds that the pre-filing of taxes for the filing of an appeal must necessarily be carried out by direct debit on ECL. This goes against the understanding of the industry and the practice followed by taxpayers to pre-deposit into the GST system. Under the old indirect tax laws, payment of a pre-deposit was allowed by debit from the Cenvat credit account.
This decision is of great importance since it affects the working capital of taxpayers preferring calls, especially in the case of taxpayers who have a huge credit build-up.