Sometimes, but not as a universally settled right. CBIC Circular 172/04/2022-GST permits an electronic credit ledger to pay output tax arising from GST proceedings, yet it does not expressly mention the section 107 appeal pre-deposit. Gujarat and Karnataka High Court decisions have accepted credit-ledger payment in the cases before them, while a reported Patna High Court decision took a cash-ledger-only view. Your forum, applicable precedent, current section 107 text and the debit actually recorded on the GST portal determine whether the payment is defensible.
What the section 107 pre-deposit is
An appeal against an adjudication order under section 107(1) of the Central Goods and Services Tax Act, 2017 generally cannot proceed until the appellant satisfies section 107(6). The appellant must pay two components:
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- the entire amount of tax, interest, penalty or other amount admitted in the impugned order; and
- the statutory pre-deposit of the disputed tax portion, calculated under the version of section 107 in force when the appeal is filed.
The Finance (No. 2) Act 2024 amendment took effect on 1 November 2024. GST Council material records that the disputed-tax pre-deposit was reduced to 10 per cent. The operative Act, applicable cap and any order-specific proviso still control the calculation, so do not rely on an old 20 per cent explanation or on a percentage quoted without checking the current text.
“Disputed tax” is not automatically the same as every figure in an order. Separate the tax you accept, the tax you contest, interest, penalty and fees before deciding which ledger can be used. A mistake in that classification can leave an appeal short-paid even when the total debit looks large enough.
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Why the electronic credit ledger is controversial
GST maintains two separate electronic ledgers. The electronic credit ledger records eligible input tax credit (ITC). The electronic cash ledger records money deposited with the government. Their permitted uses are different; a balance appearing in one ledger cannot simply be treated as money in the other.
Section 49 and the utilisation rules generally allow eligible credit to discharge output tax, subject to the prescribed order and restrictions. Interest, penalties, late fees, application fees and other non-tax liabilities normally require cash. The practical dispute is whether a section 107(6) pre-deposit is “output tax payable” or a procedural deposit that must be paid in cash.
This distinction matters even where the amount is described informally as “GST payable.” A credit-ledger debit that is not authorised for the particular liability may be rejected, or the appeal may be treated as not meeting the statutory condition.
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What CBIC Circular 172/04/2022-GST says
CBIC GST Policy Wing Circular 172/04/2022-GST, dated 6 July 2022, explains the permitted use of the electronic credit ledger. Its key statement is:
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“any payment towards output tax, whether self-assessed in the return or payable as a consequence of any proceeding instituted under the provisions of GST Laws, can be made by utilization of the amount available in the electronic credit ledger of a registered person.”
The circular therefore covers output tax that becomes payable as a consequence of a GST proceeding, not merely tax declared in a regular return. It also expressly distinguishes amounts that credit cannot pay: interest, penalty, fees and other amounts payable under the CGST or IGST Acts must not be discharged from the credit ledger.
The circular does not use the words “section 107 appeal pre-deposit.” That omission is why the issue has gone to High Courts. The circular supports an argument that a tax pre-deposit connected with a proceeding is output tax, but it is not itself a nationwide ruling on every appeal deposit.
What the High Courts have decided
Gujarat: Yasho Industries Limited v. Union of India
On 17 October 2024, the Gujarat High Court held, in the case before it, that the appellant could use the electronic credit ledger for the 10 per cent section 107(6) pre-deposit. The court relied on Circular 172/04/2022-GST and the Bombay High Court’s reasoning in Oasis Realty. The decision is important support for credit-ledger payment in Gujarat, but it does not automatically bind authorities or courts outside the precedent’s jurisdiction.
Karnataka: VK Building Services Private Limited v. The Additional Commissioner of GST
On 14 August 2025, the Karnataka High Court treated electronic-credit-ledger payment as valid in the circumstances before it. It quashed a direction requiring payment through the cash ledger and directed that the appeal be heard on its merits. The order describes the credit payment as sufficient compliance for that case. A taxpayer in Karnataka should still check the order’s facts and any later appellate development before treating it as routine practice.
Patna: reported contrary position
A Patna High Court ruling reported by LiveLaw on 3 January 2024 reached the opposite conclusion, stating that the section 107(6)(b) pre-deposit could be made only from the electronic cash ledger. The accessible report is not the full primary judgment. Treat it as a reported contrary position and obtain the judgment text before relying on its detailed reasoning or scope.
These decisions show why a single “yes” or “no” answer is unsafe. The result can turn on the state, the appeal forum, the nature of the amount and which precedent is binding.
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Comparison of the legal positions
| Authority | Date | Position on credit-ledger pre-deposit | Practical significance |
|---|---|---|---|
| CBIC Circular 172/04/2022-GST | 6 July 2022 | Credit ledger may pay output tax arising from GST proceedings; it cannot pay interest, penalty, fees or other amounts. | Provides the administrative text used to argue that a tax pre-deposit is payable from credit, but does not expressly name section 107. |
| Gujarat High Court, Yasho Industries | 17 October 2024 | Accepted electronic-credit-ledger payment of the 10 per cent section 107(6) deposit in that case. | Strong support for taxpayers litigating in Gujarat, subject to later developments. |
| Patna High Court ruling reported by LiveLaw | Reported 3 January 2024 | Took a cash-ledger-only view of the section 107(6)(b) deposit. | Contrary authority; verify the primary judgment and whether it remains applicable. |
| Karnataka High Court, VK Building Services | 14 August 2025 | Accepted credit-ledger payment in the circumstances before it and ordered the appeal to be heard. | Supportive Karnataka precedent, subject to its factual limits and subsequent appeals. |
How to decide before you debit the ledger
- Identify the appeal route. This issue concerns an ordinary appeal under section 107(1) to the Appellate Authority. Do not assume the same rule applies to an appeal to a GST Tribunal, a writ petition, a refund dispute or another statutory deposit.
- Read the current order and section 107(6). Mark the admitted amount, disputed tax, interest, penalty, fees and any special proviso. Confirm the percentage and statutory cap in the current Act rather than relying on an older checklist.
- Calculate the components separately. For example, if disputed tax is ₹20 lakh and the current 10 per cent rate applies, the disputed-tax component is ₹2 lakh. Any admitted amount must be added separately, and amounts that credit cannot pay need their own cash funding.
- Check binding law in your state and forum. Find the latest decision of the High Court with jurisdiction over the appeal and any Supreme Court order, stay or later statutory amendment. A favourable decision from another state is persuasive, not automatically binding.
- Confirm credit eligibility. Verify that the electronic credit ledger contains eligible, utilisable ITC and that the proposed utilisation follows the statutory order. A blocked, reversed or otherwise unavailable credit balance cannot support the deposit.
- Choose the payment route deliberately. If local precedent clearly permits credit for the tax component, record the debit in the credit ledger. If the law is unsettled or local authority follows a cash-only view, paying through the cash ledger may reduce an immediate procedural objection, although it may affect working capital and preserve a separate legal argument.
- Make the actual debit, not merely a book entry. A balance displayed in the credit ledger is not the same as payment. Ensure the required amount is debited against the relevant liability and that the portal generates a challan, reference or payment record where applicable.
- File and retain proof. Ordinary appeals use FORM GST APL-01. Keep the order, computation, ledger screenshots or extracts, debit reference, acknowledgement and the filed form together. If the portal rejects a credit-ledger debit, preserve the error message and time stamp before trying another route.
Portal and filing points
The appeal rules identify FORM GST APL-01 for an ordinary appeal to the Appellate Authority and describe acknowledgement and filing steps. Portal labels, validations and notifications can change, so follow the current form workflow rather than an old video or screenshot.
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Before final submission, reconcile three records: the amount calculated under section 107(6), the debit visible in the relevant electronic ledger, and the amount shown in the APL-01 acknowledgement. A cash challan without the corresponding statutory debit, or a credit debit applied to an impermissible liability, can create a mismatch that the appellate office treats as non-compliance.
Where the portal permits only a cash payment for the selected liability, do not assume that the software’s screen settles the legal issue. Record the attempted transaction, seek a written explanation from the jurisdictional office if necessary, and obtain advice on whether to pay under protest and challenge the restriction.
What the credit ledger can and cannot cover
| Amount | Credit-ledger treatment | Action |
|---|---|---|
| Disputed tax pre-deposit under section 107(6) | Accepted by Gujarat and Karnataka High Court decisions in the cases described above; disputed in other jurisdictions. | Check binding local precedent before debiting. |
| Admitted output tax | Generally within output-tax utilisation rules, subject to available eligible credit and ordering restrictions. | Apply the current utilisation rules and reconcile the debit. |
| Interest | Not payable from the credit ledger under Circular 172/04/2022-GST. | Fund through the electronic cash ledger. |
| Penalty | Not payable from the credit ledger. | Use cash. |
| Fees and other non-tax amounts | Not payable from the credit ledger. | Use the ledger or payment mode authorised for that amount, normally cash. |
Common failure modes and responses
Using an outdated percentage
Older guidance may state a higher pre-deposit. Recalculate under the law effective on the filing date, including the current cap and any special proviso. Keep a dated copy of the statutory text used.
Paying the total order amount
Section 107(6) does not ordinarily require the entire disputed demand before the first appeal. Separate admitted amounts from disputed tax and do not treat interest or penalty as disputed tax merely because they appear in the same order.
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Assuming another state’s judgment controls
Yasho Industries and VK Building Services are useful authorities, but a Patna cash-only ruling illustrates the risk of a different local approach. Ask counsel which High Court binds the Appellate Authority handling your case.
Debiting credit without checking eligibility
An ineligible or restricted ITC balance can be reversed later, leaving both a tax dispute and a defective pre-deposit. Reconcile purchase records, reversals and utilisation restrictions before filing.
Relying on a ledger balance instead of a debit
The appeal condition is payment, not possession of unused credit. Download the transaction record showing the debit and attach it where the form or appellate office requires proof.
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The circular dates from 2022, the Patna position was reported in 2024, Yasho Industries was decided in 2024 and VK Building Services in 2025. Amendments, stays, appeals and later judgments can change the practical answer. Refresh the statute and binding case law immediately before filing.
Illustrative calculation
Assume an order contains ₹5 lakh of admitted tax, ₹20 lakh of disputed tax, ₹1.5 lakh of interest and ₹50,000 of penalty. If the current 10 per cent rate applies, the disputed-tax pre-deposit is ₹2 lakh. The admitted ₹5 lakh remains payable in full. The ₹1.5 lakh interest and ₹50,000 penalty cannot be paid from the credit ledger under the CBIC circular. Whether the ₹2 lakh tax deposit may be debited from credit depends on the binding law for the appeal forum; the example does not resolve that jurisdictional question.
Practical conclusion
You may be able to use the GST electronic credit ledger for the tax component of a section 107 appeal pre-deposit, but the answer is jurisdiction-specific rather than nationwide. CBIC’s circular supports credit for output tax arising from proceedings, Gujarat and Karnataka decisions have applied that reasoning, and a reported Patna decision has rejected it. Verify the current 10 per cent rule, cap and admitted amount; keep interest, penalties and fees in cash; confirm eligible ITC and the actual portal debit; and check the precedent binding the authority hearing your appeal before filing FORM GST APL-01.
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