What happens to your pre-deposit under section 107 when you get substantial relief and prefer second appeal before GSTAT.

The requirement on pre deposit is payment of all applicable GST of undisputed portion and 10% of disputed GST portion before filing the first appeal. When the second appeal is preferred, a further 10% of GST of disputed portion is required to be made as pre-deposit for the second appeal. The possibilities of first appeal outcome are allowing, dismissing or partly allowing.

In case appeal is allowed, we must follow up for the refund of the pre-deposit which is possible in case department is not going for second appeal. In case of dismissal of appeal, identical pre deposit as made during first appeal is required under the second appeal. What happens when we get partial relief in first appeal, department is not contesting the case before GSTAT on the relief granted on first appeal and taxpayer prefers the second appeal ?. This is exactly the case which was examined by the division bench of the Bombay High Court on 28/08/2026 which is analysed in this write up.

Figures are imaginary to facilitate ease of understanding.

Under similar circumstances, the taxpayer approached the GST authorities seeking refund of excess pre deposit which is over and above the required 20% of the disputed GST before the Tribunal. As usual and in their own fairness, department rejected the refund. The taxpayer preferred a writ before the High Court which was allowed on 28/08/2026.

The reference is in the High Court of Judicature at Bombay in ordinary original civil jurisdiction writ petition (L) No 38052 of 2025 in the matter of IBM India Pvt. Ltd. Versus Union of India Through the Secretary, Department of Revenue, Ministry of Finance, New Delhi, State of Maharashtra, Deputy Commissioner of State Tax Mumbai. - 2026 (8) TMI 1848 - BOMBAY HIGH COURT. The crux of the issue is when the relief in first appeal is more than 50% and when the department accepts this and do not prefer the second appeal under Section 112, refund of pre-deposit to be applied without waiting for the final verdict of the GSTAT.

The major observations in the above case are 1) 12. Once the demand of INR 31,45,84,219/- stood set aside, a statutory right accrued in favour of the Petitioner to receive a refund of the amount paid towards pre-deposit i.e. INR 3,14,58,422/- along with interest. The continued retention of such an amount is wholly unauthorized and offends Article 265 of the Constitution.

2) 13. The Order in Appeal dated 17.03.2025, to the extent it set aside the demand of INR 31,45,84,219/-, was binding on the Respondent No.3 under Section 107(16) of the CGST Act. Therefore, the Respondent No.3 could not refuse consequential refund of the pre-deposit attributable to the demand so set aside.

The operative portion is:

(i). the writ petition is allowed.

(ii) The impugned Order is quashed and set aside.

(iii) The application for refund to the extent of Rs.3,14,58,422/ be processed expeditiously and accordingly be refunded to the petitioner in any case within a period of six weeks from the date of communication of this Order.

Take aways: Things have started to move faster now as GSTAT has started passing the final orders. Many benches are busy in admission of appeals as well as conducting the hearings. Hence, this is the most appropriate time for all taxpayers who has got substantial relief in First Appeal to seek refund from GST office of the applicable portion immediately by enclosing a copy of the above High Court order which is binding on the tax officials.

At the cost of repetition, it is once again reiterated to file as many second appeals as required to ensure substantial relief in most of the cases. As we are in September 2026 now, we shall not be in a position to file the second appeal for the first appeal orders dated prior to 30/04/2026 even with condonation petition after 31/10/2026. It is suggested to take stock of old cases so as to ensure that more appeals are filed before October for further relief which may be possible.

The 57th GST Council meeting planned on 12/09/2026 may also bring more clarity on several issues to help the taxpayers. The 56th GST Council meeting paved the way for the smooth functioning as on date of the benches of the GSTAT and one of the possible agenda may be reviewing the performance and operational capacity of the GST Appellate Tribunal (GSTAT) benches nationwide. This shall definitely help the entire nation in improving the quality of adjudication as well as reduction in litigation.

During the next few months till December 2026, we may get solution for longstanding unsolved issues such as single SCN for multiple financial years, wrong invocation of Section 74, raising demand simply on GSTR differences without verifying the reconciliation as well as making buyer responsible for seller default etc. Irrespective of whether the finality is in favour of taxpayer or not, once the issue attains finality, the taxpayer is at his liberty to plan his activities in such a manner to overcome such short comings.