Tribunalisation of GST justice necessitates tweaks

The Union Cabinet last week approved of a proposal to set up a national Bench of the Goods & Services Tax Appellate Tribunal (GSTAT) in the capital, an expected outcome in line with the decision of the 28th GST Council Meeting of July 2018. It also approved of the setting up of a centralised Appellate Authority for Advance Ruling (AAAR), which would decide those issues where there are divergent rulings at the state level. The GSTAT National Bench is the first appellate tribunal under the GST regime, akin to the Central Excise and Service Tax Appellate Tribunal (CESTAT) adjudicating disputes under Excise, Service Tax & Customs until the arrival of GST. The National Bench will act as a second appellate authority to adjudicate on matters concerning ‘place of supply’, appeals against which would lie before the Supreme Court. In a way, its mandate and scope are consistent with the Securities and Exchange Board of India (Sebi) and the Competition Appellate Tribunals under the respective statutes.

Place of supply is a pivotal factor in the GST regime in determining the nature of supply being intra-state or inter-state, and the right tax to be charged viz CGST/SGST or IGST. It is also critical in the case of imports and exports. It has always been a point of deliberation since GST is structured on a dual-competence system where the Centre, as well as the state, has the power to levy the destination-based tax.


The dispute resolution mechanism under legacy indirect tax laws has several appellate fora (CESTAT, state-level VAT and Central State Tax) whose functioning mechanism varied across fora and states, rendering it unwieldy and inefficient. GST law enabled a modular shift in the constitution and composition of the appellate bodies and tribunal. The CGST Act provides for the constitution of a National Bench and several Regional Benches at the central and the state levels, and Area Benches at the state level. The National/Regional Benches have jurisdiction over matters where at least one of the issues involved pertains to ‘place of supply’, whereas, the State/Area Benches have jurisdiction over all other matters. An appeal against the order of the State/Area Bench lies first before the jurisdictional High Court before it reaches the apex court. However, it is interesting to note that none of the states has constituted the respective State/Area benches. The Cabinet didn’t hint on the constitution of Regional Benches, which was earlier approved in the 28th Council Meeting, to be at Mumbai, Chennai and Kolkata. Perhaps, the states were awaiting setting up of the GST National Tribunal.


The GSTAT is expected to settle the perils of inconsistency created by the rulings of Authorities of Advance Ruling (AARs), which have mostly fallen against the applicant assessees, primarily due to the composition of its members. Though an AAR ruling is binding only on the applicant and the jurisdictional officer, taxpayer experiences have been that the revenue officials tend to draw inferences and apply such principles on other taxpayers. The Cabinet’s approval for creation of a centralised AAAR, by amending the GST Act, is also a positive sign for encouraging consistency in judicial rulings. Though, sceptics believe that the setting up of the appellate fora should have coincided with AARs such that there were no delays in the appellate adjudication process.


An important feature on the composition of the GSTAT, which has come under criticism is that technical member(s) would outnumber the judicial member; there is a single judicial member with two technical members (each from the Centre and state). This is certainly likely to result in an apparent imbalance in rendering justice and could undermine the impartiality of the Tribunal. There is an opportunity for course correction in this area. The Income Tax Appellate Tribunal has only independent members and given that it’s the nation’s oldest tribunal, there are learnings which lawmakers can embrace. Further, this lopsided composition also goes against a well-settled principle of the Constitutional Bench (five judges) of the Supreme Court (R. Gandhi, Madras Bar Association) holding that the number of technical members in a tribunal shall not exceed the judicial members.


The High Courts of Madras & Gujarat have already admitted petitions on this vexed issue. Surprisingly, the GST Council proceeded with the constitution of the GSTAT without considering amendments, if any, to remedy this anomaly. Another feature that has raised eyebrows is the qualification criteria for the judicial member, which exclude advocates, and for the technical members, which have left out chartered accountants. Only judicial officers (judges) or Indian Legal Service officers and Indian Revenue Service officers, respectively, fit into the above positions. This is inconsistent with and opposite to the Income Tax Tribunal’s philosophy to have only advocates and chartered accountants man the judicial & accountant member positions, respectively.


Though there was wide speculation over the fate of the CESTAT while rolling out GST in July 2017, there is urgent need on part of the Central Board of Indirect Tax & Customs (CBIC)/ Department of Revenue to clarify the position on its continuance. There is no guidance on the absorption of the erstwhile Tribunal into the GST regime or any arrangement to have the legacy issues transferred to the new tribunals like it was witnessed during the transition of the Company Law Board (CLB) to National Company Law Tribunal (NCLT).


The efforts of the GST Council in streamlining the dispute redressal mechanism is laudable and well appreciated, considering the evolution of this important law. The inconsistency in the execution of the appeal mechanism as contemplated in the statute needs to be set right at the earliest; both at the Centre as well as the state level. While the number of appeals currently decided by the first appellate authority is insignificant, the decision to constitute GST Tribunal will have a significant impact on the efficiency of the dispute redressal system and avoid court systems getting clogged with appeals and petitions. To accomplish this objective, the independence of the National Tribunal is critical. The writer is partner, BMR Legal and was assisted by Joseph K Antony, advocate. Views expressed are personal

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