India: GSTAT – What's On Board?

The idea propelling the introduction of GST i.e. 'One nation one tax' was to promote a more simplified regime of indirect taxation. Six years later, with five different rates of tax, multiple returns, and no adequate mechanism of dispute resolution, the expectations have only been partially met.

The GST Appellate Tribunal is the first appellate authority, independent of the GST department for adjudication of disputes. The Tribunal is not only the final fact-finding authority, but its role is critical for settling important questions of law and bringing about a clarity in taxation. Certainty in taxation is necessary to ensure uniformity and enable taxpayers to formulate business plans.

The original Sections 109 and 110 of the GST Act which provided for the constitution of the Tribunal were partially struck down by the Madras High Court in Revenue Bar Association v. Union of India (vide its Order dated 20.09.2018). Consequently, these provisions were amended (with effect from August 1, 2023) by the Finance Act, 2023.

Earlier, Section 109 provided for the setting up of National Benches and Regional Benches at the Central level and State Benches along with Area Benches at the State level. Under the amended provisions, concept of Regional Bench and Area Bench have been done away. The National Bench has been substituted with the Principal Bench. Now the Principal Bench will be constituted with 4 members comprising of the President (a Judge of the Supreme Court or the Chief Justice of High Court), a Judicial Member, a Technical Member (Centre) and a Technical Member (State). Similarly, the State Bench will consist of two (2) Judicial Members, a Technical Member (Centre) and a Technical Member (State). This is in line with the decision of Madras High Cour in Revenue Bar Association.

While both the Principal Bench and the State Bench will hear appeals against orders of the appellate/ revisional authority, disputes relating to place of supply will be heard exclusively by the Principal Bench. Appeals where the tax amount involved, input tax credit or the amount of fee, fine or penalty do not exceed 50 lakh rupees and the issue does not involve any question of law, shall be heard by a Single Member.

It is only after the Goods and Services Tax Appellate Tribunal (Appointment and Conditions of Service of President and Members) Rules, 2023 are notified, the appointments for the constitution of the Tribunal can begin.

In the absence of a GST Tribunal, the taxpayers were compelled to approach the High Courts and Supreme Court for relief, especially, in cases involving substantial questions of law; or high stakes; or due to recovery action initiated by the revenue authorities. It is expected that once the Tribunal starts functioning, the taxpayers will be able to exercise their statutory right of appeal available under GST and will not need to avail writ remedy, considerably easing the burden of the High Courts and Supreme Court and providing quick relief to the taxpayers.

However, the delay of 6 years in the setting up of the Tribunal has created problems for the taxpayers and the industry.

For all pending disputes, the limitation of three (3) months will begin as soon as the Tribunal is constituted, and the President/ State President of the Tribunal assumes office. Thus, all appeals which could not be filed in the last 6 years will have to be filed within a short span of 3 months. With the large volume of appeals, there is a possibility of overcrowding and inability of the system to cope up.

It is anticipated that an online facility will be introduced for filing of appeals as has been done in the Supreme Courts, High Courts, and other Tribunals. With such a large influx of appeals, acceptance of both manual and online filing should be considered in the initial stage, for a simpler, friendlier, and hassle-free process.

The Tribunal will start functioning with a huge pendency of cases which will only increase with time. Even with the setting up of multiple Benches, the Government needs to devise a suitable mechanism for allocation of appeals either year-wise/ the period of dispute or based on the subject-matter of dispute.

It is unfortunate that it has taken 6 years for the Government to set up the Tribunal. The taxpayers have been deprived of a fair and independent dispute resolution mechanism and have been compelled to accept the Department's views and interpretation of the GST law. The advance ruling authority has in most cases also ruled in favour of the Department, and thus failed to provide to meet expectations of taxpayers. Nonetheless, looking at the recent developments, the taxpayers are hopeful that the Tribunal will be set up by the end of 2023.

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