The doctrine of indulgences and the treasury of merit is linked with the doctrine of the communion Saints. The East accepted the principles of indulgences; it's just that the practice was more developed in the West --or at least it is now. It was also so in the East post-schism, but they repudiated it very recently during their period known as their “Exodus from Western Captivity” in the late 19th and early 20th centuries (this was also when they repudiated the doctrine on original sin since it was developed most precisely in the West as a response to Pelagianism, cf. the Pan-Orthodox Council of Jerusalem in 1672 where they teach it as we do).
For example, indulgences are specifically affirmed at the pan-Orthodox Council of Constantinople in 1722. Even as late as 1838, the pan-Orthodox Council of Constantinople of that year merely states they cannot be used to raise money. They were practiced in the Greek Church as late as 1955. See
here.
The doctrine of indulgences is linked with the doctrine of the communion Saints. The elements of this doctrine are all biblical and were present in the early Church East and West--it is more obvious in the penitential practice of the early Church, but it still applicable today of course.
First, it bears pointing out that there are three parts to repentance--contrition, confession, and bringing forth fruits worthy of repentance (this last part is often called "satisfaction.") It is the third part that is related to indulgences. Here are some biblical references to this last part (note: the DRV which I am citing uses the phrase "do penance" or the word "penance" in the place many translations use "repent" and "repentance" but the meaning is the same):
(see also Matt. 3:8, Luke 3:8 )
The East never had a problem with this last element. It is affirmed by the
Pan-Orthodox Council of Jerusalem in 1672, for example.
Now, there are various ways by which one brings forth fruit worthy of repentance or, in other words, makes satisfaction for sins. This is done through prayer, acts of charity, and self-denial, etc but also suffering through the chastisments that God may send Himself.
The Church from the very beginning also prescribed such acts of satisfaction. One common one, early on, was cutting the sinner off from the sacraments for a period of time (this is still common in the East and for certain more serious sins in the West). St. Paul prescribes such satisfaction for the incestuous man in Corinth here:
Later, the Church adopted other forms of satisfaction in different times and places many taking months or even years to complete. For example, someone who committed a very grievous sin might have to live a strict disciplined life in a monastery for a period of time (this is why prisons are often called penitentiaries, from the root "penitent.")
If someone were to die before bringing forth worthy fruits, that process was and is understood to be finished in the afterlife as the Council of Florence explained:
The hero of Eastern Orthodoxy's resistance to reunion with the Catholic Church, Mark of Ephesus, taught the exact same thing (only quibbling with the idea of fire or the idea of a place; he taught that the cleansing was “much more tormenting and punishing than anything else.”
:
An indulgence is a remittance of this need to make satisfaction either partially or fully (a "plenary indulgence). St. Paul granted such a pardon to the same incestuous man in Corinth:
It should be noted that during certain periods, partial indulgences were delineated by periods of time like days or years to correspond to prevailing penitential disciplines, but today they are generally called "partial" only and their value is relative to the act on which the granting of the indulgence is conditioned.
Such dispensations in regards to the need to make satisfaction were also granted in the East.
Anyway, since the need to make satisfaction extends into the afterlife, it followed logically that the indulgence would also.
(see also Matt. 16:18)
Otherwise, if one were loosed on earth, but it did not effect the afterlife, the indulgence would be a cruelty deceiving the penitent into thinking he had brought forth sufficient fruits when he had not. No one in the East ever taught that when someone was loosed from the obligation towards satisfaction by the Church, the person would still be subject to the cleansing pains due to someone who had not made the sufficient satisfaction. In other words, they understood the power of the indulgence as extending to the afterlife.
Nowadays in the West, since prescribed penances are meant more to simply turn the penitent back to God through prayer rather than equal the total fruits worthy of repentance, the focus of indulgences is more on their effects in the afterlife.