Lawyers have lauded the Goods and Service Tax (GST) Council’s approval for the formation of GST Appellate Tribunal (GSTAT) on February 18, opining that the tribunal will enhance the ease of doing business in the country.

Since the tribunal will have a bench in every state, lawyers note that it will ensure lower pendency and faster disposal of cases, while highlighting that tribunals will clarify the provisions of GST law, which in turn, will reduce the scope for future litigation.

While the tribunal is bound to see a large number of cases in the near future, it is likely to reduce in the long run as the tribunal starts clarifying the law.

As the tribunal is yet to be formed, persons intending to initiate GST-related litigation in the courts, are filing writ petitions against the orders of officials before the high courts.

The immediate aftermath of the formation of the tribunal will be a reduction in the GST-related writ petitions in the high courts across the country.

What is the role of the tribunal?

Despite the GST Act having been introduced in the country in 2017, a dedicated tribunal for GST is expected to be established only in 2023.

Since GST replaced central excise, service tax, additional customs duty and state-level value-added tax, the GSTAT is a successor to the Customs Excise Service Tax Appellate Tribunal (CESTAT) and State VAT tribunals.

When the department raises a claim against a GST payer, the latter can contest the claim at various levels, starting from the Adjudicating Officer (known as ‘proper officer’ in GST law) to the Supreme Court. If the taxpayer receives an unfavourable order from the Adjudicating Officer, the taxpayer can approach the Appellate Authority (Commissioner of Appeals); the order of the appellate authority is appealable in the tribunal.

The order of the tribunal can be appealed in the high court and finally in the Supreme Court.

In the absence of a tribunal, GST-related litigation may take more than a year to reach finality. However, once the tribunal is introduced, taxpayers may choose not to approach the high courts if the tribunal resolves the dispute.

How is GSTAT different from CESTAT?

The announcement that GSTAT will have benches in each state is a stark departure from the government’s policy on CESTAT, which has a total of nine benches across the country. CESTAT has frequently been criticised for the slower disposal of cases and large pendency.

As of November 2022, CESTAT had a pendency of over 78,000 cases across its nine benches. While the pendency can be attributed to many reasons, one of the most important is the lack of benches in many states. For instance, while there are three benches of CESTAT in the five southern states, there are only three benches covering the entire north.

What do lawyers say about GSTAT?

Facilitates ease of doing business:

Most businesses fall under GST’s radar by virtue of it being a tax on goods and services. The lack of a tribunal to interpret and adjudicate the disputes makes it difficult for entrepreneurs to run their businesses as disputes have stayed unresolved for years.

Suvigya Awasthy, Associate Partner at PSL Advocates and Solicitors, said, “The constitution of the GST Appellate Tribunal is a testament to the Government’s efforts in making India a business-friendly and preferred destination for trade and commerce, as speedy disposal of tax-related disputes facilitates ‘ease of doing business’.

He, however, notes that the government must ensure that GSTAT does not suffer from bureaucratic issues of excessive government interference or administrative issues regarding lack of resources and infrastructure. He said, “It is hoped that the GST Appellate Tribunal does not face concerns relating to lack of members for adjudication and has sufficient members to ensure expeditious disposal of cases. "

A welcome step:

Sanjeev Sachdeva, Partner, Luthra and Luthra Law Offices India, notes that the announcement on the establishment of an Appellate Tribunal for GST is a welcome step. He said, “This will go a long way in resolving contentious issues and reducing litigation.”

Rohit Arora, Advocate, Tax and Commercial Law, said, “The decision to have state benches is welcome, as it would help resolve the issues under GST in an expeditious manner and provide ease to the litigants. The presence of a state tribunal would provide a legal remedy to the litigant within his state which is an appreciated step inasmuch that it would help an individual in exercising his rights.”

Will bring clarity in GST law: 

The introduction of any new legislation is bound to trigger a flood of litigation in the courts, either challenging the constitutional validity of certain sections of law or regarding the interpretation of the provisions of law.

While the high courts and the Supreme Court can answer the questions related to the constitutional validity of the law, interpreting sections of the law may become a cumbersome exercise, especially considering the existing pendency in the courts. The tribunal is thus tasked with interpreting the provisions of the law. According to Charanya Lakshmikumaran, Partner at tax firm Lakshmikumaran and Sridharan, GSTAT will not only replace CESTAT but also the various State Value Added Tax Tribunals, which are present in every state. She said, “This is definitely a step to reduce litigation because once you have a tribunal, each tax division within a state will start following the tribunal’s decision. Over time, this will definitely reduce litigation, because the law will become clearer and questions of law will be settled.”

Cost-effective litigation for taxpayers:

Maneet Pal Singh, Partner, I.P. Pasricha & Co, said, “GSTAT will indeed be beneficial for taxpayers as filing appeals in the high court was a time-consuming and costly process. This will now be expected to become cost-effective for a taxpayer.”

Makes way for divergent views on same issues: 

While lauding the announcement on GSTAT, Ankit Jain, Partner at Ved Jain and Associates, said, “The only challenge that we see is that different state tribunals hold divergent views on similar issues, which adds to the complexity of the problem. We hope that having a centralised Principal Bench in New Delhi will be able to resolve such differences.”