Finance Act, 2025-Changes in appeal procedure applicable from 01st April, 2025!

The Finance Act, 2025, has introduced key amendments to the appeal procedure under the Central Goods and Services Tax (CGST) Act, 2017, effective from April 1, 2025. These changes primarily impact Sections 107 and 112, which govern appeals to the Appellate Authority and the Appellate Tribunal, respectively. One of the significant revisions includes the introduction of a mandatory pre-deposit of 10% of the penalty amount in cases where the demand consists solely of penalties or fees. This amendment aims to streamline the appeal process and ensure a fairer compliance mechanism. Let’s explore the modifications in detail.

Read more on Finance Act, 2025-Track and Trace Mechanism introduced! & Finance Act, 2025-ISD Provisions applicable from FY 2025-26! here. 

Amendment of section 107- appeals to the Appellate Authority:

Section 107 of the CGST Act, 2017 outlines the provisions related to appeals to the Appellate Authority.

It’s Sub-section 6 earlier stated that an appeal with the appellate authority shall be filed only on payment of the following amounts:

• The full amount of admitted tax, interest, fine, and penalty; and
• 10% of the disputed amount of tax

Therefore, if demand only consists of a penalty or fee, there was no pre-deposit provision.

Now, it is amended to provide a pre-deposit of 10% of such a penalty for filing an appeal in such cases.

The amended section 107(6) is as follows:

“(6) 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 percent. 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.

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 percent. of the said penalty has been paid by the appellant.”

Amendment of section 112- Appeals to the Appellate Tribunal:

Section 112 of the CGST Act, 2017 deals with Appeals to the Appellate Tribunal.

It’s Sub-section 8 earlier stated that an appeal with the appellate tribunal shall be filed only on payment of the following amounts:

• The full amount of admitted tax, interest, fine, and penalty; and
• 10% of the remaining disputed amount of tax after the order of the appellate authority is passed (this is in addition to the pre-deposit made while filing an appeal to the appellate authority)

Therefore, if demand only consists of a penalty or fee, there was no pre-deposit provision.

Now, it is amended to provide a pre-deposit of 10% of such a penalty for filing an appeal in such cases. This is to be paid in addition to the pre-deposit amount paid while filing an appeal to the appellate authority.

The amended section 112(8) is as follows:

“(8) 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 percent. of the remaining amount of tax in dispute, in addition to the amount paid under sub-section (6) of section 107, arising from the said order, subject to a maximum of twenty crore rupees, in relation to which the appeal has been filed.

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 percent. of the said penalty, in addition to the amount payable under the proviso to sub-section (6) of section 107 has been paid by the appellant.”

Conclusion

The amendments to Sections 107 and 112 of the CGST Act, 2017, introduced by the Finance Act, 2025, mark a significant shift in the appeal process. By mandating a 10% pre-deposit on penalty demands, the government has reinforced its commitment to efficient dispute resolution while ensuring compliance with tax laws. Businesses and taxpayers must take note of these changes to avoid procedural hurdles and ensure smooth filing of appeals. As these provisions take effect from April 1, 2025, staying informed and prepared will be crucial for seamless tax administration.

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