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May 20, 2025
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SC upholds use of input tax credit for mandatory GST appeal deposit
The Supreme Court on Monday ruled that taxpayers could use their electronic credit ledger (ECrL), a digital record of tax credits earned from purchases, to make advance deposits needed in the case of disputes on goods and services tax (GST).
In the context of GST, tax credit refers to input tax credit, or ITC, which means the credit of GST paid on purchases that a business can use to offset the GST liabilities on sales. This overrides demands by tax authorities that only the electronic cash ledger (ECL) be used. The ECL tracks cash payments like taxes, penalties, or fees. According to experts, the ruling ends discomfort for businesses, which can preserve cash by using ECrL balances instead.
The dispute began when Yasho Industries, a Mumbai-based specialty chemicals manufacturer, was asked to pay Rs 3.36 crore “only in cash” (via ECL) as a pre-deposit in an appeal despite having enough credits in its ECrL. The Gujarat High Court in October upheld the company’s position, citing a 2022 government circular.
“The SC decision will provide relief to millions of taxpayers by allowing the use of the ECL,” said Abhishek Rastogi, founder of Rastogi Chambers, who argued for the taxpayer before the SC.
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