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Utilising Credit lying in Electronic Credit Ledger for Predeposit - Jyoti Construction - Orissa HC


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Honorable Orissa High Court dismissed the Writ Petition filed by M/s Jyoti construction against rejection of appeal due to utilization of Credit lying in Electronic Credit Ledger for making pre-deposit.


Facts of the Case

Additional Commissioner of Sales Tax (Appeal), Central Zone, Odisha, rejecting the appeal filed by the Petitioner under Section 107 (1) of the Odisha Goods and Services Tax Act, 2017 (OGST Act) and holding that the appeals filed are defective since the Petitioner herein had made payment of the pre-deposit being 10% of the disputed amount under the IGST, CGST and SGST by debiting its electronic credit ledger (ECRL) and did not pay it from the electronic cash ledger (ECL) and furnished the proof of payment of the mandatory pre-deposit and that this was in contravention of Section 49(3) of the OGST Act read with Rule 85

(4) of the OGST Rules, 2017.


Appellant’s Contention

Contention of the Appellant’s learned counsel, is that under Section 49 (4) of the OGST Act, the amount available in the ECRL could be used for making "any payment towards output tax” under the OGST Act or the IGST Act “in such manner and subject to such conditions and within such time as may be prescribed”. Under Rule 85 (4) of the OGST Rules, the amount deducted under Section 51, or collected under Section 52, or the amount payable on reverse charge basis, or; the amount payable under Section 10, or any amount payable towards interest, penalty, fee or “any other amount under the Act” shall be paid by debiting the ECL (i.e. the cash ledger) maintained under Rule 87 and the electronic ledger

liability register (ELR) shall be credited accordingly.


As per collective reading of the above Rules, the pre-deposit could be made by debiting the ECRL. Learned Counsel refers to the definition of “Output Tax” under Section 2 (82) of the OGST Act which means “tax chargeable under this Act on taxable supply of goods or services or both” made by the taxable person or his agent but excludes tax payable on reverse charge basis. On this basis, it is contended that since what in effect be the Petitioner was paying was a percentage of the output tax as defined under Section 2(82) of the OGST Act, the amount could well be paid by debiting the ECRL.


Department’s Contention

On the other hand, Mr. Mishra, learned ASC for the Department refers to Section 49 (3) of the OGST Act which requires payment to be made from the ECL and Section 49 (4) which refers to the ECRL. It is submitted that the pre-deposit cannot be equated to the output tax. The proviso to Section 41 (2) of the OGST Act sets out the purposes for which the input tax credit (ITC) can be utilized. It can be utilized for payment of “self-assessed output tax as per the return”. It is pointed out that self-assessment is defined under Section 59 of the OGST Act i.e. when the tax payer files a return under Section 39 of the OGST Act and the Form GSTR-3B, the taxpayer is deemed to be self-assessed. In no other cases, can ITC be utilized to discharge any liability. He also refers to Rule 85 (3) of the OGST Rules which states that “subject to the provision of Section 49 payment of every liability by a registered person as per his return shall be made by debiting the electronic credit ledger maintained as per Rule 86”.


Court’s Decision

The Court is unable to find any error having been committed by the appellate authority in rejecting the Petitioner’s contention that the ECRL could be debited for the purposes of making the payment of pre-deposit.


Observations

  1. Whether pre-deposit can-not be treated as Output Tax liability. Pre- Deposit is nothing, but merely a part payment of the tax liability in dispute.

  2. The Decision of Honorable court would lead to major blockage of working capital.

  3. Since court relied on the fact that credit can be utilized for payment of self-Assessment Tax, Therefore, Payment made through credit at the time of GSTR-9/9C or at the time of department audit may also be in dispute.

  4. Law nowhere distinct the word pre-deposit and Output Tax. Rather Pre-deposit is understood as a certain percentage of Output Tax.

  5. Form APL-01 as available on GST Portal also provides the option to pay the amount of pre-deposit by either cash or Credit.


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