GST
Appeal pre-deposit when the order is penalty only
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Facts
From 1 October 2025, the Finance Act 2025 requires a 10 percent pre-deposit of the penalty for penalty-only appeals at the first appeal stage. Earlier, most penalty-only appeals needed no pre-deposit. Courts are divided on whether this applies to older cases.
Provisions and law
- Sec 107(6), CGST Act 2017Appeal is admitted only on payment of admitted dues in full and 10 percent of disputed tax, subject to a cap
- Finance Act 2025, amendment to Sec 107(6)Penalty-only appeals require 10 percent of the penalty as pre-deposit from 1 October 2025
Analysis
Example: a Sec 122 penalty of Rs 5 lakh with no tax demand needs Rs 50,000 pre-deposit for an appeal filed now. The Delhi High Court has held that the new condition does not apply where the show cause notice was before 1 October 2025, and the Supreme Court was to hear the issue. The 57th GST Council in October 2026 recommended a Rs 40 crore total cap for such cases; check whether it has been notified.
Conclusion
- Check whether your order has tax or only penalty
- Note the date of the show cause notice
- Compute 10 percent of the penalty as pre-deposit
- If your notice is before 1 October 2025, take advice on whether to pay
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