Penalty-Only GST Orders? Pre-Deposit Rules under Section 112(8) Explained

1. Introduction

In the GST appeal there is one condition that before filling of application for filling of appeal at GSTAT level there should be some pre deposit should be done before filling an appeal before the GSTAT. For section which govern this things is 112(8) of the Central Goods and Services Tax Act, 2017.

Section 112(8) must be read with Section 112(9). While Section 112(8) prescribes what must be paid before filing the GSTAT appeal, Section 112(9) grants an important statutory benefit: once the required pre-deposit is made, recovery of the balance amount is deemed to be stayed till disposal of the appeal. The current statutory text requires payment of admitted dues in full and 10% of the remaining disputed tax, in addition to the amount already paid at the first appellate stage under Section 107(6).

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2. Statutory Scheme of Section 112(8)

Section 112(8) provides that no appeal shall be filed before the Appellate Tribunal unless the appellant has paid the following amounts:

First, the appellant must pay in full such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order as is admitted by him.

Second, the appellant must pay a sum equal to 10% of the remaining amount of tax in dispute, in addition to the amount already paid under Section 107(6) at the first appeal stage, subject to the statutory maximum of Rs 20 crore under the CGST Act.

Thus, the provision creates two separate categories:
admitted liability, which must be paid fully; and disputed tax, on which percentage-based pre-deposit is required.

3. Meaning of "Admitted Amount"

The admitted amount means that part of the demand which the taxpayer accepts as payable. This may include admitted tax, admitted interest, admitted fine, admitted fee or admitted penalty.

For example, where the order confirms tax of Rs 50 lakh, interest of Rs 8 lakh and penalty of Rs 50 lakh, but the taxpayer admits tax of Rs 10 lakh and interest of Rs 2 lakh, the admitted amount will be Rs 12 lakh. This amount must be paid in full. The appellant cannot dispute part of the order and simultaneously keep the admitted amount unpaid.

4. Meaning of "Remaining Amount of Tax in Dispute"

The second component of Section 112(8) applies only to the remaining amount of tax in dispute. The percentage pre-deposit is not calculated on the total demand including interest and penalty. It is calculated on disputed tax only.

This distinction is important. In a normal tax-demand case, where tax, interest and penalty are all disputed, the GSTAT-stage pre-deposit is calculated only on disputed tax. Disputed interest and disputed penalty are not separately subjected to 10% pre-deposit under Section 112(8)(b), unless the case falls under the special penalty-only proviso.

The Calcutta High Court in M/s Evergreen Construction & Anr. v. Commissioner of Commercial Taxes, MAT 424 of 2024, order dated 09.04.2024, while dealing with the earlier 20% wording, held that the pre-deposit obligation under Section 112(8)(b) is confined to the remaining amount of tax in dispute and does not extend to disputed interest. The principle remains relevant because the statutory expression continues to be "tax in dispute".

5. Cumulative Effect of Section 107(6) and Section 112(8)

At the first appeal stage under Section 107(6), the taxpayer is required to pay 10% of the disputed tax. At the GSTAT stage, Section 112(8) requires another 10% of the remaining disputed tax, in addition to the amount already paid under Section 107(6). Therefore, in a regular tax-demand matter, the cumulative pre-deposit generally becomes 20% of disputed tax : 10% at first appeal stage and another 10% at GSTAT stage.

This does not mean that the GSTAT pre-deposit is 10% of the balance demand after reducing the first appeal pre-deposit. It is an additional 10% of the disputed tax.

6. Penalty-Only Orders

A separate proviso has been inserted in Section 112(8) for cases where the order demands penalty only without any demand of tax. In such cases, no GSTAT appeal can be filed unless the appellant deposits 10% of the penalty , in addition to the amount payable at the first appellate stage under the proviso to Section 107(6). The CBIC-hosted statutory text notes that this proviso was inserted with effect from 01.10.2025.

Therefore, where penalty alone is confirmed and no tax is demanded, the pre-deposit is calculated on penalty, not on tax.

7. Automatic Stay of Recovery under Section 112(9)

The most important consequence of making the pre-deposit is the statutory stay of recovery. Section 112(9) provides that where the appellant has paid the amount as per Section 112(8), recovery proceedings for the balance amount shall be deemed to be stayed till disposal of the appeal.

This means that, after proper pre-deposit, the taxpayer is not required to obtain a separate stay order from GSTAT for the balance disputed demand. The stay operates by force of law.

CBIC Circular No. 224/18/2024-GST dated 11.07.2024 also clarified that where the taxpayer intends to file a GSTAT appeal and pays the amount equal to the required pre-deposit, recovery of the remaining confirmed demand stands stayed under Section 112(9), subject to compliance with the procedure and undertaking requirements mentioned in the Circular.

8. Mode of Payment and Practical Compliance

CBIC Circular No. 224/18/2024-GST clarified that taxpayers may make payment towards demand through the portal by navigating to Services → Ledgers → Payment towards demand , selecting the relevant demand order in the Electronic Liability Register Part-II. The amount paid is mapped against the selected order and is adjusted against the pre-deposit required at the time of filing appeal before GSTAT.

The Circular further required, in cases where GSTAT was not operational, that the taxpayer should file an undertaking/declaration before the jurisdictional proper officer stating that appeal will be filed before GSTAT within the prescribed timelines once the Tribunal becomes operational. Upon payment and filing of undertaking, recovery of the remaining demand would stand stayed.

9. Practical Examples

Example 1: Entire Tax Demand Is Disputed

Suppose the order confirms the following demand: