PRE-DEPOSIT IN GST APPEALS: ACCESS TO JUSTICE OR FINANCIAL BURDEN ON TAXPAYERS? A CRITICAL ANALYSIS OF PRE-DEPOSIT AND COURT FEES BEFORE GSTAT

INTRODUCTION

Since 2017, the Goods and Services Tax (GST) law in India was introduced with the grand vision of “One Nation, One Tax, One Market”, and it has brought significant changes to tax administration and compliance. However, as the ecosystem matured, the dispute resolution mechanism has increased between taxpayers and revenue protection. The right to appeal under GST or challenge a tax demand before the appellate forum is an important safeguard against errors in tax administration. Under the GST regime, the taxpayer cannot approach the appellate forums without complying with certain statutory requirements. One of the most important requirements is mandatory Pre-Deposit.

However, under Section 107 of the Central Goods and Services Tax Act, 2017 (CGST Act), taxpayers have a right to file a first appeal before the appellate authority against an order passed by the adjudicating authority. under Section 112 of the CGST Act, a second appeal can be filed before the GSTAT against orders passed by the appellate authority within the prescribed time limit of 3 months from the date of communication of the order. But to file these appeals, they may pay, at the first appellate stage under section 107(6), 10% of the disputed tax amount before the appellate authority, followed by a second appeal, at the tribunal stage, an additional pre-deposit of 10% of the remaining tax in dispute under section 112(8), which automatically balances the recovery of remaining amounts and is stayed in accordance with section 107(7) and 112(9). This mechanism is intended to balance two foundational interests. i.e. to discourage frivolous appeals and to secure partial revenue during the pendency of litigation.

Apart from pre-deposit, the taxpayer is also required to pay the prescribed Non-Refundable Court Fees for filing the appeal before the Tribunal under Rule 110(5) of CGST Rules and GSTAT Procedure Rules. The taxpayer may have to arrange the pre-deposit, court fee and professional litigation expenses before the dispute is finally adjudicated. This raises a vital question for legal and tax policy.

Does the present GSTAT appellate mechanism adequately balance revenue protection with the taxpayer’s right to effective access to justice, or does the cumulative financial burden create an unintended barrier to legal remedy?

PRE-DEPOSIT: A STATUTORY CONDITION FOR GST APPEALS

Under the GST regime, the law requires you to put “skin in the game” to deter frivolous litigation. The mechanism of pre-deposit serves several purposes, i.e. first, to protect government revenue during the pending litigation period; second, to discourage purely non-serious appeals to delay recovery; and third, to create a uniform statutory requirement rather than a question of stay entirely at the discretion of the appellate authority. It is consciously designed as part of the appellate structure. Therefore, it intends to balance competing interests.

The statutory amount that an appellant must deposit before an appeal can be entertained by the authority. It is different from payment of the entire disputed tax demand under Section 107(6) of the CGST Act, 2017. Filing a first appeal before the appellate authority requires either full payment of the admitted amount of tax, interest, fine, fee and penalty, or 10% of the remaining amount of tax in dispute arising from the order; the maximum cap is subject to the statutory cap of 20 crore rupees. The recovery of the remaining disputed balance is legally stayed under Section 107(7). Thus, the statutory scheme ensures that a taxpayer is shielded from immediate 100% while pursuing a first-tier challenge.

Pre-Deposit at GSTAT Stage:

Nonetheless, according to Section 107 of the Central Goods and Services Tax Act, 2017 (CGST Act), taxpayers are entitled to submit a first appeal to the appellate authority against an order issued by the adjudicating authority. Additionally, as per Section 112 of the CGST Act, a second appeal may be lodged with the GSTAT regarding decisions made by the appellate authority within a stipulated time frame of 3 months from the order’s communication date. To file these appeals, they may pay, at the first appellate stage under section 107(6), 10% of the disputed tax amount to the appellate authority, and then for the subsequent appeal at the tribunal stage, a further pre-deposit of 10% of the outstanding taxable amount under section 112(8), which effectively offsets the collection of the remaining sums and is stayed as per sections 107(7) and 112(9).

COURT FEES AND COST OF GST LITIGATION

The discussion on litigation costs cannot be restricted to pre-deposits alone. A taxpayer approaching the GSTAT must also pay a separate, non-refundable court fee under Rule 110(5) of CGST Rules, 2017. It calculates the fee at Rs. 1,000/- for every 1 lakh rupees of tax, input tax credit, fine, fee, and penalty determined in the order, subject to a statutory minimum of Rs. 5,000/- and a maximum of Rs. 25,000/-. However, where the order appealed against does not involve any demand of tax, interest, fine, fee or penalty, a flat court fee of Rs. 5000/- is payable. Although Rule 110 was substituted with effect from 10 July 2024 and subsequently amended in September 2025 to introduce procedural changes, these amendments did not alter the prescribed court-fee amounts.

Appeals before the GSTAT involve three distinct costs, i.e.

• Pre-Deposit under Section 112(8) of the CGST Act- A condition precedent to filing the appeal, requiring an additional pre-deposit of 10% of the remaining tax in dispute, over and above the amount paid under Section 107(6), subject to a maximum of Rs. 20 crores. The total pre-deposit thus amounts to 20% of the disputed tax, including the amount paid at the first appellate stage. If the appellant succeeds, the amount is refundable with applicable interest under Section 115, to the extent of relief granted.
• Court/Filing Fees under Rule 110 of the CGST Rules- An appeal fee, linked to the amount in dispute and subject to a maximum, which is paid to the government and is not recovered whatever the outcome.
• Professional and Compliance Cost- Legal representation, documentation and procedural compliance are not prescribed by statute but form a real expense that a successful appellant ordinarily cannot recover.

Is court fee a significant burden?

The financial burden of court fees depends on the value of tax disputed.  The fee functions at an effective 1% rate of the disputed demand, scaling upwards until it reaches the statutory ceiling of Rs. 25,000/- prescribed under Rule 110(5) at a demand threshold of Rs. 25 lakhs. For high-value tax litigation, the fee becomes a marginal fraction of the overall financial exposure.  In low-value tax disputes below Rs. 5 lakhs, the minimum court fee of Rs.5,000/- takes effect. For small taxpayers challenging a minor assessment, like Rs 50,000 or 1 lakh, this minimum threshold raises the actual fee burden significantly beyond 1%, resulting in an unjustifiably high upfront cost. The rigid initial costs, along with non-refundable professional fees and required pre-deposits, predominantly impact small businesses and MSMEs, directly supporting the necessity for a revised, sliding-scale court fee system for lower-value appeals.

BROADER CONCERN ON PRINCIPLE OF ACCESS TO JUSTICE

Court fees have historically been recognised as a mechanism for regulating access to judicial and quasi-judicial forums. In the GST context, the court fee is prescribed for GSTAT appeals under Rule 110(5) of the CGST Rules, 2017. A taxpayer may have a strong legal case but insufficient liquidity to pursue the remedy. This may create financial difficulties for small and medium-sized enterprises, businesses experiencing temporary cash-flow constraints, and taxpayers whose working capital is already tied up in tax disputes. Similar concerns may arise in substantial classification or input tax credit disputes involving complex questions of interpretation. In such circumstances, the taxpayer may have arguable legal grounds but insufficient financial resources to pursue the appellate process. The question is not merely whether an appeal technically exists; the more important issue is whether the appellate remedy is practically accessible.

A taxpayer may have to bear:

Pre-deposit + Court fee + Professional fees + Documentation/Compliance costs + Cost of delayed working capital.

Therefore, assessing the accessibility of GSTAT solely by looking at the statutory court fee would give an incomplete picture.

THE REAL PROBLEM: LIQUIDITY RATHER THAN FINAL LIABILITY

The main issue with compulsory pre-deposit is the short-term blocking of funds instead of their irreversible loss. Even if a taxpayer ultimately succeeds in the appeal and becomes entitled to a refund with interest, the deposited funds remain inaccessible for business operations throughout the litigation. This could impact working capital, employee and supplier payments, and daily operations. Thus, the main issue is whether the obligation to deposit a specified sum poses a financial obstacle to seeking an appellate remedy, especially for companies with restricted liquidity.

CONCLUSION

The pre-deposit and court fee structure established by the CGST Act and its rules strikes a balance between discouraging frivolous lawsuits and safeguarding government revenue alongside the taxpayer’s right to contest. Nonetheless, required pre-deposits, application fees, and temporary fund freezes can pose practical obstacles to accessing justice, affecting small and medium enterprises or taxpayers with constrained financial means the most. To cultivate a genuinely fair tax dispute resolution environment, policy initiatives like a tiered pre-deposit, partial backing through a bank guarantee, and a variable court fee for minor disputes ought to be considered. Maintaining the practical accessibility of the appellate remedy while safeguarding state revenue.

TAGS/ KEYWORDS: GST, Pre-deposit, GST Appeals, Section 107 and Section 112 of the CGST Act, 2017, GSTAT, Access to justice, Court fees, Appeal fees, Rule 110 CGST Rules, SMEs, CGST Act 2017.

AUTHOR DETAILS: Manasvi Odiya, J.P. Associates: IPR & GST law firm, Gwalior.

REFERENCES

1. Central Goods and Services Tax (CGST) Act, 2017, bare act
2. Ministry of finance (department of revenue) Notification No. S.O. 4220(E), Notification No. 12/2024-CT, Notification No. 13/2025-CT, and GSTAT Procedure Rules, 2025. (2025–2026).
3. The Finance (No. 2) Act, 2024 (No. 15 of 2024)
4. Union of India v. Yasho Industries Ltd., SLP (Civil) Diary No. 17547 of 2025, Supreme Court of India, Decided on 19 May 2025.
5. Simla Gomti Pan Products Pvt. Ltd. v. Commissioner of State Tax, U.P. & Ors., Supreme Court SLP (C) No. 5266 of 2026 (Order dated March 20, 2026)
6. Reddy Veeranna Constructions Pvt. Ltd. v. Appeal-I Commissioner & Ors., 2026 SCC Online GSTAT 158 (GSTAT Hyderabad, decided on July 28, 2026)

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