AMENDMENTS IN APPELLATE PROVISIONS UNDER SECTION 107 OF CGST ACT, 2017

[Dr. Sanjiv Agarwal]

Amendment made by Finance (No. 2) Bill, 2024

The Finance (No. 2) Bill, 2024 has made two amendments in section 107, i.e. following two changes have been made in relation to maximum amount of pre-deposit under sub-section (6) and adding reference to new section 74A in sub-section (11).

According to Notes on Clauses to the Finance (No.2) Bill, 2024, amendment in sub-section (6) aims to reduce the maximum amount of pre-deposit for filing  appeal before the Appellate Authority from rupees twenty-five crores to rupees twenty crores in central tax.

Consequently, the upper ceiling of pre-deposit amount for section 107 appeals which is presently Rs. 25 crore shall stand reduced to Rs. 20 crore, i.e. a reduction of 20% w.e.f. from a notified date. The amendment shall provide monetary relief to taxpayers or appellants. Another amendment is in sub-section (11) so as to include reference to new section 74A which has been inserted by Finance (No. 2) Bill 2024. Now sub-section (11) which contains reference to sections 73 or 74 shall also cover section 74A. It may be noted that Finance (No. 2) Bill 2024 has inserted new section 74A to provide for common time limit for issuance of notices and orders for demands for FY 2024-25 onwards.

Amendment in Section 107(6) (w.e.f. notified date)

The Finance (No. 2) Bill 2024 has amended section 107(6) so as to substitute “twenty” for the word “twenty five”.

According to notes on clauses to the Finance Bill, 2024, this amendment seeks to amend sub-section (6) of section 107 of the Central Goods and Services Tax Act, so as to reduce the maximum amount of pre-deposit for filing appeal before the Appellate Authority from rupees twenty-five crores to rupees twenty crores in central tax. The said amendment has been made to reduce the maximum amount of pre-deposit for filing appeal with the appellate authority from Rs. 25 crores of Central Tax to Rs. 20 crores of Central Tax. This amendment was recommended by the GST Council in its 53^rd meeting held on 22.06.2024.

The GST Council recommended reducing the amount of pre-deposit for filing of appeals under GST to ease cash flow and working capital blockage for the taxpayers. The maximum amount for filing appeal with the appellate authority has been reduced from Rs. 25 crores CGST and Rs. 25 crores SGST to Rs. 20 crores CGST and Rs. 20 crores SGST.

Thus, based on the amendment made by Finance (No. 2) Bill 2024, the following position would emerge for payment of pre-deposit under section 107(6) of CGST Act, 2017.

Demand	Prior to Finance Act, 2024	As per Finance Act, 2024 w.e.f. notified date
Demands which have not been contested	Entire amount of such demands (tax, interest, fine, fee and penalty) arising from the impugned order	Entire amount of such demands (tax, interest, fine, fee and penalty) arising from the impugned order
Demands which have been contested	A sum equal to 10% of the remaining amount of tax in dispute arising from the said order, subject to a maximum of twenty-five crore rupees in relation to which the appeal has been filed.	A sum equal to 10% 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.

In other words, the status of pre-deposit to be made for appeal before Appellate Authority shall be as follows:

Tax	Prior to Finance Act, 2024	W.e.f. Finance Act, 2024
CGST	10% of amount of tax in dispute subject to maximum of Rs. 25 crores	10% of amount of tax in dispute subject to maximum of Rs. 20 crores
SGST	10% of amount of tax in dispute subject to maximum of Rs. 25 crores	10% of amount of tax in dispute subject to maximum of Rs. 20 crores
Total (CGST + SGST)	10 % of amount of tax in dispute subject to maximum of Rs. 50 crores	10 % of amount of tax in dispute subject to maximum of Rs. 40 crores

The above is applicable for CGST and for states.

It may also be noted that CBIC has also clarified vide Circular No. 224/18/2024-GST dated 11.07.2024 for recovery of outstanding dues on disposal of appeal under section 107 which requires pre-deposit to be made for stay of recovery under section 78 of the CGST Act, 2017. In view of the fact that GST Appellate Tribunals have not been made functioning so far, CBIC clarifications provide the guidelines for recovery of outstanding dues subject to payment of pre-deposit and its subsequent adjustment when the appeal is filed before Appellate Tribunal under section 112 of the CGST Act, 2017. These have been discussed under sub-section 11 of section 107 and in Chapter 13 of the book.

Amendment in Section 107(11) (w.e.f. notified date)

The Finance (No. 2) Bill, 2024 has amended section 107(11) so as to insert ‘section 74A’. According to Notes on Clauses to the Finance Bill, 2024, this amendment is a consequential amendment in sub-section 11 of the section 107 to incorporate a reference to the proposed new section 74A.  The said insertion of section 74A has been made to replace both Sections 73 and 74, consolidating the calculation of tax and penalty under a single section for both the fraud and non-fraud cases. This means that both fraud and non-fraud cases will fall under the new section 74A starting from the financial year 2024- 25 (w.e.f. 01.04.2024) instead of separate sections 73 and 74. However, matters related to period up to financial year 2023-24, section 73 and section 74 shall be applicable.

Section 74A is being inserted in the CGST Act to provide a common time limit for issuance of demand notices and orders in respect of demands for FY 2024-25 onwards, for cases involving charges of fraud, suppression of facts or wilful misstatement and the cases not involving the charges of fraud, suppression of facts or wilful misstatement etc. Also, the time limit for the taxpayers to avail the benefit of reduced penalty, by paying the tax demanded along with interest, is being increased from 30 days to 60 days.

This amendment was recommended by the GST Council in its 53^rd meeting held on 22.06.2024.