In its ruling last October, the High Court had stated that the company could utilise the amount in its ECrL to pay the 10 per cent of the disputed tax as mandated under the GST Law.
| Photo Credit:
ePhotocorp
The Supreme Court on Monday dismissed an appeal by the GST Department against a Gujarat High Court ruling that allows the use of funds available in the Electronic Credit Ledger (ECrL) for pre-deposit payments. Experts believe this decision will provide significant relief to industries facing cash flow constraints.
A division bench comprising Justices B V Nagarathna and Satish Chandra Sharma rejected a special leave petition filed by the government challenging the Gujarat High Court’s ruling in the case of Yasho Industries. In its ruling last October, the High Court had stated that the company could utilise the amount in its ECrL to pay the 10 per cent of the disputed tax as mandated under the GST Law.
The case arose after a dispute regarding an integrated goods and services tax (IGST) reversal. Following a show-cause notice, the company appealed to the Commissioner (Appeals) and deposited the pre-deposit amount of over ₹3.36 crore using funds from its ECrL. However, the Tax Department instructed the company to make the pre-deposit through the Electronic Cash Ledger. Aggrieved by this directive, the company approached the High Court.
The High Court referred to a circular issued by the Central Board of Indirect Taxes and Customs (CBIC) on July 6, 2022, which clarified that “any amount towards output tax payable, as a consequence of any proceeding instituted under the provisions of GST Laws, can be paid by utilisation of the amount available in the Electronic Credit Ledger of a registered person.”
Consequently, the High Court held that “the amount paid by the petitioner as pre-deposit in compliance with section 107(6)(b) of the CGST Act utilising the amount of the Electronic Credit Ledger is required to be considered valid.”
This order has now been upheld by the Supreme Court.
Commenting on the ruling, Saurabh Agarwal, Tax Partner at EY India, stated that the SC judgment provides a much-needed breather to industries struggling with cash flow. He explained that previously, companies in dispute often had to pay the pre-deposit in cash, even if they had substantial GST credit in their ledger, leading to significant working capital blockages.
“This new ruling, by allowing them to use their existing credit to make these pre-deposits, will free up their cash. Furthermore, if they ultimately win their case, they won’t have to undergo the lengthy process of claiming a refund, as the adjustment would already be within their credit ledger. It’s a win-win in terms of immediate cash flow and avoiding future hassles,” he concluded.
Published on May 19, 2025
In its ruling last October, the High Court had stated that the company could utilise the amount in its ECrL to pay the 10 per cent of the disputed tax as mandated under the GST Law.
| Photo Credit:
ePhotocorp
The Supreme Court on Monday dismissed an appeal by the GST Department against a Gujarat High Court ruling that allows the use of funds available in the Electronic Credit Ledger (ECrL) for pre-deposit payments. Experts believe this decision will provide significant relief to industries facing cash flow constraints.
A division bench comprising Justices B V Nagarathna and Satish Chandra Sharma rejected a special leave petition filed by the government challenging the Gujarat High Court’s ruling in the case of Yasho Industries. In its ruling last October, the High Court had stated that the company could utilise the amount in its ECrL to pay the 10 per cent of the disputed tax as mandated under the GST Law.
The case arose after a dispute regarding an integrated goods and services tax (IGST) reversal. Following a show-cause notice, the company appealed to the Commissioner (Appeals) and deposited the pre-deposit amount of over ₹3.36 crore using funds from its ECrL. However, the Tax Department instructed the company to make the pre-deposit through the Electronic Cash Ledger. Aggrieved by this directive, the company approached the High Court.
The High Court referred to a circular issued by the Central Board of Indirect Taxes and Customs (CBIC) on July 6, 2022, which clarified that “any amount towards output tax payable, as a consequence of any proceeding instituted under the provisions of GST Laws, can be paid by utilisation of the amount available in the Electronic Credit Ledger of a registered person.”
Consequently, the High Court held that “the amount paid by the petitioner as pre-deposit in compliance with section 107(6)(b) of the CGST Act utilising the amount of the Electronic Credit Ledger is required to be considered valid.”
This order has now been upheld by the Supreme Court.
Commenting on the ruling, Saurabh Agarwal, Tax Partner at EY India, stated that the SC judgment provides a much-needed breather to industries struggling with cash flow. He explained that previously, companies in dispute often had to pay the pre-deposit in cash, even if they had substantial GST credit in their ledger, leading to significant working capital blockages.
“This new ruling, by allowing them to use their existing credit to make these pre-deposits, will free up their cash. Furthermore, if they ultimately win their case, they won’t have to undergo the lengthy process of claiming a refund, as the adjustment would already be within their credit ledger. It’s a win-win in terms of immediate cash flow and avoiding future hassles,” he concluded.
Published on May 19, 2025
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It is a long established fact that a reader will be distracted by the readable content of a page when looking at its layout. The point of using Lorem Ipsum is that it has a more-or-less normal distribution of letters, as opposed to using ‘Content here, content here’, making it look like readable English. Many desktop publishing packages and web page editors now use Lorem Ipsum as their default model text, and a search for ‘lorem ipsum’ will uncover many web sites still in their infancy.
The point of using Lorem Ipsum is that it has a more-or-less normal distribution of letters, as opposed to using ‘Content here, content here’, making
The point of using Lorem Ipsum is that it has a more-or-less normal distribution of letters, as opposed to using ‘Content here, content here’, making it look like readable English. Many desktop publishing packages and web page editors now use Lorem Ipsum as their default model text, and a search for ‘lorem ipsum’ will uncover many web sites still in their infancy.
It is a long established fact that a reader will be distracted by the readable content of a page when looking at its layout. The point of using Lorem Ipsum is that it has a more-or-less normal distribution
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