INTRODUCTION
GST (Goods and Services Tax) is a tax system introduced in India through the GST Bill, 2024. It is a value added tax system levied on goods & services sold for the consumption of households. The GST is paid by consumers but transferred to the government by the businesses that are selling the goods & services.
After the introduction of GST in India, to ensure timely resolution of disputes & to improve cash flow & business certainty, GSTAT (Goods & Service Tax Appellate Tribunal) has been launched by the Union Government to hear appeals against orders passed by the appellate & revisional authorities.
Firstly, under Section 107 of the CGST Act, an appeal has been filed to the First Appellate Authority. Further appeal can be filed to the GST Appellate Tribunal (GSTAT) under Section 112 of the CGST Act. Lastly, the appellant can reach the High Court & Supreme Court on substantial questions of law.
Appeal has been introduced to ensure fairness & accountability throughout the system, but a major obstacle to availing this process is the substantial requirement of payment of a pre-deposit before filling of an appeal, especially for small businesses & MSMEs (micro, small & medium enterprises). Many taxpayers forcefully accept unfavourable orders, as they can’t afford the pre-deposit amount.
The 53rd GST council acknowledged that this requirement weakened the core principles of natural justice and access to legal remedies. Thus, the council proposed the reduction in pre-deposit amounts, which was later inserted through the Finance Act, 2024.
PRE-DEPOSIT SYSTEM BEFORE FINANCE ACT, 2024
Before the amendments of 2024, the framework for pre-deposits was considered very strict & expensive. Under Section 107 of the CGST Act, a taxpayer willing to file an appeal must pay 100 percent of the admitted tax & 10% of the disputed tax, subject to a maximum cap of ₹25 crore for CGST and ₹25 crore for SGST. This simply means that businesses had to block huge amounts of money just to challenge an assessment order.
Further, in Section 112 of the CGST Act, to appeal to the GSTAT (GST Appellate Tribunal), the prior amendment requirement to pay a pre-deposit was even more burdensome. As the appellant had to deposit 20% of the disputed tax, subject to a cap of ₹50 crore for CGST and ₹50 crore for SGST. This became a huge reason for large corporations to pursue valid disagreements & forced a lot of individuals to settle under coercion instead of going to court.
AMENDMENT TO SECTION 112 OF CGST ACT THROUGH FINANCE ACT, 2024
The Finance Act, 2024, introduced a major amendment to Section 112 of the CGST Act that provides significant relief to the appellants who want to approach the GSTAT but can’t afford the pre-deposits.
| Aspect | Earlier Position | New Position after Finance act, 2024 |
| Percentage of disputed tax | 20% | 10% |
This amendment also did a great job in aligning India’s pre-deposit framework with the international standards, as excessive pre-deposits are discouraged generally.
MAJOR REASONS FOR THE AMENDMENT IN THE PRE-DEPOSIT REGIME
Amendment in the pre-deposit regime helped India’s tax policy approach to mark a significant shift towards a more taxpayer friendly, fairness oriented & business supportive GST administration. There are some significant reasons for the amendment of the pre-deposit regime:
1) Promote Ease of Doing Business & Economic Growth – One of the central reasons for the amendments is the objective of strengthening “Ease of Doing Business.” By lowering the financial obstacles for filing appeals, the government made it clear that it wants to establish a more cooperative tax climate as opposed to a hostile one. Further, a fairer system for appeal contributes to the confidence of the investor.
2) Ensuring Access to Justice & Fairness – Excessive pre-deposit requirements were considered as the indirect violation of the principle of access to justice, which is incorporated in Articles 14 & 21 of the Constitution. The reform guarantees that access to legal remedies is determined by the strength of a person’s case rather than their financial situation.
3) Aligning to International Tax Standards – These reforms aligned India’s GST system with international tax standards, as most of the countries follow a more taxpayer friendly ecosystem in the pre-deposit regime. Indian pre-deposit requirements before 2024 were considered very difficult, but after this amendment, India moves closer to international standards.
4) Promoting Merit-Based Lawsuits rather than Coerced Settlements – Under the prior framework, many taxpayers opted to not file appeals, as many of them couldn’t afford it. This resulted in what is commonly referred to as “coerced compliance,” as taxpayers complied with contested requests not out of conviction but rather under financial pressure.
JUDICIAL REFORM SUPPORTING THE AMENDMENTS
The Supreme Court ruling allowing taxpayers to use their electronic credit ledger to pay the 10% pre-deposit for GST appeals became a significant legal development following these amendments. This also reduced the cash burden on businesses. Furthermore, CBIC explained that in the event that the taxpayer prevails in their appeal, pre-deposits would be reimbursed.
CONCLUSION
The reduction in pre-deposit requirements under Sections 107(6) and 112(8) of the CGST Act through the Finance Act, 2024 marks a progressive and taxpayer centric reform in India’s GST framework. By lowering the mandatory pre-deposit for appeals before the GST Appellate Tribunal from 20% to 10% of the disputed tax, the government has significantly reduced the financial burden on businesses, particularly MSMEs and small taxpayers.
This amendment strengthens access to justice, promotes fairness, and reinforces the constitutional principles embedded under Articles 14 and 21. It shifts the GST dispute resolution mechanism from a financially restrictive model to a more balanced and merit-based system. The reform also aligns India’s tax administration with global best practices, fostering investor confidence and enhancing the ease of doing business.
Additionally, judicial support permitting the use of the electronic credit ledger for payment of pre-deposit further eases liquidity constraints and ensures that genuine disputes can be pursued without undue hardship.
Overall, the amendment represents a meaningful step toward a more equitable, transparent, and business friendly GST regime ensuring that the right to appeal is governed by the strength of legal arguments rather than the financial capacity of the taxpayer.
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Author: Kartikey Saxena, 5th Year Law Student, Prestige Institute of Management and Research, Gwalior.
REFERENCES
Press Release of 55Th GST Council Meeting: https://cbic-gst.gov.in/pdf/Press-Release%20-55-GST-Council.pdf
Finance Act, 2024: https://incometaxindia.gov.in/news/finance-act-2024.pdf