The Goods and Services Tax Appellate Tribunal (GSTAT) has been one of the much-needed adjudicatory mechanisms ever since the Goods and Services Tax (GST) regime came into existence. It is important because it holds significant potential in transforming the landscape of GST-related tax litigation in India. When the GST regime was introduced in 2017 via the Constitution (101st Amendment) Act, 2016, it was envisioned as a unified, simplified taxation system under the broader commitment of ‘One Nation, One Tax, One Market’. It subsumed multiple taxes like VAT, Service Tax, Excise Duty, and others and consolidated them into a single system. On the other hand, the GST act has been successful in fulfilling most of its promises like the Creation of a Common National Marke t[63.9 lakh taxpayers transitioned from service tax, VAT, and Central Excise frameworks and currently, there are 1.4 crore registered taxpayers under GST law], Boost to Revenue Collection of the government [GST collections hit a record high in April 2024 at ₹2.10 lakh crore marking a significant 12.4% year-on-year growth, driven by a strong increase in domestic transactions (up 13.4%) and imports (up 8.3%). After accounting for refunds, the net GST revenue stood at ₹1.92 lakh crore, which is 15.5% growth compared to the same period last year], Promotion of Exports [Zero Rating of Exports], Reduction in Tax Evasion [From 65 lakh suppliers registered with the government in pre-GST regime to 1.4 crore in GST 2023], it failed to fulfill its promise of establishing an Appellate Tribunal, aimed at providing swift justice and reducing litigation costs. Although the Tribunal was legislatively mandated, it remains unconstituted even after 7 years of the GST Act, leaving taxpayers without a common appellate body to resolve disputes. A ray of hope emerged in 2024 wherein the government not only received the notification for establishing the Appellate Tribunal but also released a roadmap providing information regarding cities where the benches will be set up and the possible deadline for their establishment. However, before understanding the provision related to the establishment of the Tribunal, it is pertinent to delve into the challenges faced for the 7 years due to the delay of GSTAT and the possible outcomes post its establishment.
The proposal for setting up the GST Appellate Tribunal across the country was approved in its 49th meeting of the GST Council and the Council recommended the rules governing the appointment and conditions of the President and Members of the proposed GST Appellate Tribunal in its 50th meeting. Ultimately, the Finance Ministry via a fresh notification dated 31.07.2024 notified 31 benches of GSTAT to be set up in all states and Union Territories. The GST Council had cleared the way in its meeting on July 11, 2024, and the first set of tribunals might be operational sometime between November 2023 and January 2024. GSTAT will be operational with its principal bench in Delhi and 31 regional benches comprising of 63 judicial members and 33 Technical Members for the Centre and States together.. It will be a successor to the Customs Excise Service Tax Appellate Tribunal (CESTAT) and State VAT tribunals. The new notification will supersede all previous notifications and has added a new column ‘sitting/circuit’. Uttar Pradesh and Maharashtra (along with Goa) will have three Benches each, while other larger States, like Gujarat, Karnataka, Rajasthan, and Tamil Nadu will have two benches each. 'Circuit' locations will be operational in such manner as the President may order, depending upon the number of appeals filed by suppliers in the respective States/jurisdiction while the additional ‘sitting’ will function with one Judicial Member and one Technical Member. Panaji, Puducherry, Aizawl, Agartala and Kohima, Mumbai, Chennai, Kolkata etc have been designated as circuits while Visakhapatnam, Rajkot, Hissar, Srinagar, Thiruvananthapuram, Thane, Chhatrapati Sambhajinagar, Chandigarh, Coimbatore, Prayagraj, Agra etc will have sittings. The Principal Bench will take up matters related to inter-state disputes and the Benches in States will take up other issues. The aggrieved parties have the option to move to the High Courts and Supreme Court. With GSTAT coming into force, the country will have specialized bodies to handle disputes related to GST in a timely and efficient manner.
The absence of GSTAT has led to a surge in litigation and ambiguity in tax matters. As per data provided by Minister of State for Finance Pankaj Chaudhary in Lok Sabha during the Monsoon Session of 2024, the number of appeals relating to Central GST authorities has more than doubled since 2020-21 with 5,499 cases pending. This increased further to 9,759 cases by the end of fiscal 2021-22, 11,899 in 2022-23, and 14,227 in 2023-24 (up to June 2023) with cases increasing since then. The lack of a single appellate authority forced taxpayers dissatisfied with decisions by lower authorities to approach High Courts, which not only led to overburdening the judiciary and delaying justice but also other complex trends of divergent High Court decisions and accessibility. Seeking justice through High Courts made it affordable only to the ones who could afford it. This made justice expensive for small businesses like MSMES who might not always be able to afford the same thus leading to differential treatment. This further widens the gap between big businesses with strong roots and small enterprises already surviving on Government aid like Priority Sector Lending, Pradhan Mantri MUDRA Yojana (PMMY), etc. The need for aid is not only important for them to compete but is also important for their survival and hence when justice becomes expensive, they are either forced to divert funds otherwise required for the functioning of their business to resolving disputes via High Courts or are simply forced to not seek resolution at all. This violates the objective of Article 14 of the Constitution of India which prohibits discrimination and promotes the right to equality. Some other issues such as pending refunds, increased interest liabilities, and cash flow challenges have compounded the difficulties for businesses, which face repeated show-cause notices without a resolution mechanism in place since High Courts which lack expertise, qualifications, and experience of the sector-specific challenges faced by various businesses cannot be accepted as a replacement of an expert appellate authority mandated for the purpose specific to GST. Hence, the constitution of GSTAT is attributed to positive factors such as the required qualification of members, balancing judicial and technical expertise, and the central and state government's participation. Although the Government has released the notification, the tribunal is yet to become functional, exacerbating the backlog of cases.
There has been a renewed push for the formation of GSTAT, with a Group of Ministers (GoM) recently proposing amendments to address the lingering challenges. Stakeholders hope that once operational, the tribunal will enhance efficiency in dispute resolution, reducing both costs and delays. However, GSTAT will likely face an immediate backlog upon its establishment, as several years of pending cases await adjudication. In such a situation, it will be pertinent for the tribunal to bunch the appeals with common issues together and start hearing matters.
The appellate will adjudicate anti-profiteering cases with a “sunset date” of April 1, 2025, after which filing of such complaints will not be allowed. This is based on the recommendation of the law committee under the GST Council taking into consideration the view expressed by the Competition Commission of India (CCI) which stated it is unable to handle such matters. This is in line with the recommendation of the law committee under the GST Council after the Competition Commission of India (CCI) expressed its inability to handle such matters, saying that it was not its core function. CCI has disposed of almost 27 cases since December 1, 2022, while almost 140 cases are still pending for adjudication. Additionally, almost 184 matters are pending in various high courts challenging orders of previous authority.
The anti-profiteering provisions under the GST law mandate suppliers of goods and services to pass on the benefit of any lenient tax provisions to recipients by way of commensurate reduction in prices. National Anti-Profiteering Authority which was set up in November 2017 under Section 171 of the Central Goods and Services Tax Act, 2017 to deal with unfair profiteering activities by registered suppliers was subsumed with CCI on December 1, 2022, as per Notification No. 23/22-C.T. When NAA was in charge, it had issued penalties to over 100 companies, including Hindustan Unilever, Patanjali, Jubilant Foodworks, Reckitt Benckiser, Phillips, Gillette India, and several others, who had moved the High Court against the anti-profiteering provisions. These parties have moved to the Supreme Court after the High Court upheld the constitutional validity of the provision. Some leniency will be provided with regard to the sunset clause and the mandate will be given to the principal bench of GSTAT to specify the said date from which the authority will not accept any request of anti-profiteering issues. Later, if required, the matter will be transferred to the benches across the country. The creation of GSTAT is essential not only to fulfill the original promise of a streamlined GST regime but also to alleviate the burden on the judiciary and provide timely justice to taxpayers. Moving forward, it is imperative for the government to expedite the tribunal’s formation and ensure that it functions efficiently from day one to meet the rising demand for GST dispute resolution. Under the GST Law, there is no concept of amicable settlement for disputes. Appeals are resolved based on the legal provisions and regulations in place. This will lead to a higher volume of cases being brought before appellate authorities, tribunals, and courts, leading to increased costs and time delays. A purely legal approach to dispute resolution can foster an adversarial relationship between the parties leading to discouragement for voluntary compliance and fostering mistrust in the system. The government can consider introducing a settlement commission or a dispute resolution mechanisms under the GST regime. Periodic amnesty schemes or settlement windows can be introduced to encourage taxpayers to come forward voluntarily and resolve disputes by paying the tax or penalty, thereby avoiding litigation. The government must also consider implementing a Taxpayer Facilitation Scheme to allow for early resolution of disputes through communication and clarification of issues between tax officers and taxpayers. This could help minimize disputes.