Answer

GST

Appeal pre-deposit when the order is penalty only

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  1. 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.

  2. 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
  3. 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.

  4. Conclusion

    1. Check whether your order has tax or only penalty
    2. Note the date of the show cause notice
    3. Compute 10 percent of the penalty as pre-deposit
    4. If your notice is before 1 October 2025, take advice on whether to pay

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