Published 14 October 2026
An appeal against a GST demand cannot be filed until money has been paid. How much depends on what the appellant admits, how much tax is in dispute, which tax heads are involved, and whether the order demands tax at all or only a penalty. Where it can be paid from is another question. Appellate authorities have rejected appeals because the pre-deposit came from the credit ledger, and High Courts have disagreed about whether they could. The payment also decides what the department may do in the meantime. Once it is made, recovery of the balance stops.
This guide covers section 107(6) and (7): the amount, the caps, penalty-only orders, how and from which ledger it is paid, and the stay that follows. Filing the appeal itself is in Filing a First Appeal: APL-01. Recovery generally is in Recovery, and Paying in Instalments.
What must be paid
Section 107(6) provides that “No appeal shall be filed under sub-section (1), unless the appellant has paid”:
(a) in full, such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by him; and (b) a sum equal to ten per cent. of the remaining amount of tax in dispute arising from the said order, subject to a maximum of twenty crore rupees, in relation to which the appeal has been filed.
Three things follow from the words.
The admitted amount is paid in full. Whatever part of the tax, interest, fine, fee or penalty the appellant accepts is paid before filing. This is the “Amount of demand admitted” in item 14 of FORM GST APL-01.
Ten per cent of the tax in dispute, not of the whole demand. Clause (b) is calculated on “the remaining amount of tax in dispute”. Interest and penalty in dispute do not enter it. Take an order for Rs 50,00,000 of tax, Rs 30,00,000 of interest and Rs 50,00,000 of penalty, where Rs 10,00,000 of the tax is admitted and the rest disputed. The appellant pays Rs 10,00,000 plus the interest on it, if admitted, and then ten per cent of Rs 40,00,000, which is Rs 4,00,000.
“Paid”, not “deposited”. The section uses the word “paid”, and High Courts have relied on that word in deciding which ledger may be used (see below).
The caps
The cap in clause (b) is twenty crore rupees. It was twenty-five crore until section 141 of the Finance (No. 2) Act, 2024 substituted “twenty”, from 1 November 2024 under Notification No. 17/2024-Central Tax.
The cap applies to each tax separately: central tax under the CGST Act, and State tax under the corresponding clause of the State Act. For integrated tax, the last proviso to section 20 of the IGST Act provides that “a maximum amount of forty crore rupees shall be payable for each appeal to be filed before the Appellate Authority or the Appellate Tribunal”. FORM GST APL-01, as amended from 1 November 2024 by Notification No. 20/2024-Central Tax, puts it the same way: “10% of disputed tax/cess but not exceeding Rs. 20 crore each in respect of CGST, SGST, cess, and not exceeding Rs. 40 crore in respect of IGST”.
The portal applies these caps. Its manual says that where the calculated pre-deposit exceeds the limit, a warning appears. Choosing “NO” captures the maximum permissible amount in the payment table.
Orders demanding only a penalty
Clause (b) works on tax. An order that demands only a penalty leaves nothing for it to bite on. From 1 October 2025, a proviso deals with this:
Provided that in case of any order demanding penalty without involving demand of any tax, no appeal shall be filed against such order unless a sum equal to ten per cent. of the said penalty has been paid by the appellant.
Section 129 of the Finance Act, 2025 substituted this proviso, and Notification No. 16/2025-Central Tax brought it into force on 1 October 2025. It replaced an earlier proviso, which applied only to orders under section 129(3) (detention and seizure of goods in transit) and required twenty-five per cent of the penalty. FORM GST APL-01 as published still has a row for “Pre-deposit in case of sub-section (3) of section 129”. The portal’s manual, however, describes a “Pre-Deposit% of Penalty” field defaulting to 10 per cent.
Which orders the new proviso reaches is not settled. In Gaurav Jain v Joint Commissioner (Appeals-II) (31 July 2026) the Delhi High Court held that it does not govern appeals arising from proceedings begun by a show cause notice dated before 1 October 2025, taking the date of the notice as decisive. A bench of the GST Appellate Tribunal has reached a similar result on the parallel proviso to section 112(8) by reference to the date of the orders. Appealing to the GST Appellate Tribunal sets out both decisions.
The proviso has no cap. At its 57th meeting on 8 October 2026, the GST Council recommended amending the provisos to sections 107(6) and 112(8) to cap the pre-deposit for penalty-only orders at Rs 40 crore (Rs 20 crore under the CGST Act and Rs 20 crore under the SGST or UTGST Act). It also recommended a circular on “various issues relating to payment of pre-deposits”. These are recommended, not yet notified. Until the Act is amended, the uncapped ten per cent applies.
The portal’s manual adds a note of its own. Where the demand is only penalty and the appellant “has already paid minimum of 10% of penalty amount mentioned in original order”, the 10 per cent need not be paid again on filing.
Paying it: in the appeal form, or against the demand first
There are two routes on the portal.
Through the appeal form. The manual describes a UTILIZE ITC/CASH button within APL-01. It shows the liability and the cash and credit ledger balances. The appellant enters the amounts to be paid from each and clicks SET-OFF, and a payment reference number is issued. The manual notes: “ITC can be adjusted against Tax liability only.”
Against the demand, before filing. An amount paid against the demand in the electronic liability register counts towards the pre-deposit. So does an amount paid by DRC-03 and then linked to the demand by FORM GST DRC-03A under rule 142(2B). Circular No. 224/18/2024-GST (11 July 2024) says such an amount “shall also be liable to be adjusted towards the amount required to be paid as pre-deposit under Section 107 and Section 112”. The linking procedure is in Before a Notice: DRC-01A and Paying Voluntarily.
Where the appellant believes a lower figure is due, the manual says a lower percentage “may be declared here with relevant approvals from the competent authorities”, for example a court order. The portal warns, and then calculates on the lower figure.
Paying it from the credit ledger
Section 49(4) allows the electronic credit ledger to be used “for making any payment towards output tax”. Whether the pre-deposit is “output tax” is the question.
The Board’s position. Circular No. 172/04/2022-GST (6 July 2022), item 6, clarifies that “any payment towards output tax, whether self-assessed in the return or payable as a consequence of any proceeding instituted under the provisions of GST Laws, can be made by utilization of the amount available in the electronic credit ledger”. Item 7 adds that the credit ledger “cannot be used for making payment of any interest, penalty, fees or any other amount”. The circular does not mention pre-deposit by name. Read together, its two items allow the credit ledger for a pre-deposit calculated on disputed output tax. They do not allow it for the admitted interest or penalty, or for the ten per cent of a penalty-only order. Nor does the credit ledger pay tax under reverse charge, which item 6 also excludes.
Against it: Orissa. In M/s Jyoti Construction v Deputy Commissioner of CT and GST (Orissa High Court, Division Bench, W.P.© Nos. 23508 and others of 2021, 7 October 2021), a works contractor had paid ten per cent of the disputed IGST, CGST and SGST by debiting its credit ledger. The Additional Commissioner (Appeals) rejected the appeals as defective. The Court held it was “not possible to accept the plea of the Petitioner that ‘Output Tax’ … could be equated to the pre-deposit”. It dismissed the petitions and left the reversal of the ledger debit to a separate remedy. The judgment predates Circular 172.
For it: Bombay and Gujarat, and the Supreme Court’s dismissal. The Bombay High Court took the opposite view in Oasis Realty v Union of India, reasoning from the word “paid” and from section 49(4); its reasoning is read here as the Gujarat High Court quoted it. In M/s Yasho Industries Ltd v Union of India (Gujarat High Court, Division Bench, R/Special Civil Application No. 10504 of 2023, 17 October 2024), an exporter had paid Rs 3,36,82,000 as pre-deposit from its credit ledger through DRC-03. The appellate authority’s letter directed it to pay through the cash ledger instead. The Court quoted Oasis Realty and Circular 172, and held the credit-ledger payment “sufficient compliance” with section 107(6)(b). The Allahabad High Court, in M/s G. Tech Print Works v Joint Commissioner (Appeals) (Writ Tax No. 4300 of 2025, 24 September 2025), records that the department’s special leave petition against Yasho was dismissed by the Supreme Court on 19 May 2025. In Wellknown Polyesters Ltd v Union of India (Bombay High Court, W.P. No. 12095 of 2024, 5 August 2025), an appellate authority had again refused a credit-ledger pre-deposit. The Court noted that its view “aligns with that taken by the Patna High Court” in Flipkart Internet Pvt Ltd v State of Bihar (2023), but held that Oasis Realty “could not have been ignored”. It sent the appeal back to be decided on merits.
The Patna and Orissa decisions have not been overruled by their own courts. The Supreme Court’s dismissal of the special leave petition in Yasho left the Gujarat judgment standing, and the later Bombay and Allahabad decisions follow it. Circular 172 and the portal’s own credit-ledger option point the same way.
The stay of recovery
Section 107(7): “Where the appellant has paid the amount under sub-section (6), the recovery proceedings for the balance amount shall be deemed to be stayed.”
- No application is needed. The stay follows from the payment.
- It covers the balance. It does not cover the admitted amount, which is paid in full.
- It lasts while the appeal is pending. The portal’s FAQ says that “if Appeal filed is admitted, the GST Portal flags the balance disputed amount as non-recoverable”.
- Recovery cannot start before three months anyway, unless the officer has shortened the period for recorded reasons. Section 78 gives three months from service of the order before recovery proceedings begin. The appeal period and the recovery period run together.
- If the appeal is withdrawn, the portal’s manual says “the pre-deposited amount will be adjusted against the taxpayer’s liability” and the remaining demand must be paid.
The further pre-deposit for the Tribunal
A second appeal needs a second payment. Section 112(8) requires the admitted amount and “a sum equal to ten per cent. of the remaining amount of tax in dispute, in addition to the amount paid under sub-section (6) of section 107”, also capped at twenty crore rupees. For penalty-only orders, a parallel proviso requires a further ten per cent of the penalty. Payment stays recovery “till the disposal of the appeal” (section 112(9)). The detail, including the Tribunal portal’s pre-deposit screens, is in Appealing to the GST Appellate Tribunal.
Getting it back
If the appeal succeeds, the pre-deposit is refunded with interest under section 115, “from the date of payment of the amount till the date of refund”. The Council’s 57th meeting recommended making section 115 a standalone provision on the rate, and a circular on that rate. This too is recommended, not yet notified. The procedure is in Getting the Pre-Deposit Back.
What to have ready
| Item | Where it comes from |
|---|---|
| The demand, split into tax (by head), interest, penalty, fee | The order and DRC-07 |
| The admitted and disputed amounts | The person’s own working |
| Cash and credit ledger balances | Portal, electronic cash and credit ledgers |
| Any earlier payment against the demand, and DRC-03 payments to be linked by DRC-03A | Electronic liability register; DRC-03 register |
| Any court order reducing the pre-deposit | The court’s order |
| For admitted IGST, the place-of-supply break-up | The order |
Who signs
The payment is made within APL-01, or against the demand, by the authorised signatory, and is part of the appeal signed with DSC or EVC under rule 26.
What can still be put right
- A shortfall in the pre-deposit makes the appeal defective. In G. Tech Print Works, the Allahabad High Court directed that any shortfall be intimated to the appellant and paid within 15 days, rather than the appeal being dismissed.
- A DRC-03 payment made under the wrong head can be linked to the demand through DRC-03A, and then counts towards the pre-deposit.
- Appeals rejected because the pre-deposit came from the credit ledger have been restored by the Bombay, Gujarat and Allahabad High Courts, on the reasoning above.
The steps in order
- From the order, separate admitted from disputed amounts, and tax from interest and penalty.
- Calculate ten per cent of the disputed tax for each head, applying the caps: Rs 20 crore each for CGST, SGST and cess, Rs 40 crore for IGST. For a penalty-only order, calculate ten per cent of the penalty.
- Decide the ledger. Disputed output tax may come from the credit ledger. Interest, penalty, fee and a penalty-only pre-deposit come from the cash ledger.
- Link any DRC-03 payment to the demand through DRC-03A.
- Pay through UTILIZE ITC/CASH in APL-01, and keep the payment reference.
- File the appeal. Once it is admitted, recovery of the balance is stayed.
- Keep the payment records for the Tribunal pre-deposit and for any refund.
The next guide covers what happens after filing: the hearing, adjournments, additional evidence, the order in FORM GST APL-04, and its effect on the demand.