Date: 23/09/2022

Relevance: GS-2: Functions and responsibilities of the Union and the States, issues and challenges pertaining to the federal structure, devolution of powers and finances up to local levels and challenges therein.

Key Phrases: Goods and Service Tax (GST), GST Council, Challenges and Issues in GST implementation, Goods and Service Tax Appellate Tribunal (GSTAT)

Context:

• Even after five years of implementation of Goods and Service Tax (GST), the Goods and Service Tax Appellate Tribunal (GSTAT) is yet to see the light of the day.
• Recently, a Division Bench of the Supreme Court in response to a petition related to the constitution of the GSTAT has directed the Union Government to file an expedited response.

Background:

• The Central Goods and Service Tax Act, 2017 (CGST Act) in Section 109 mandates for the constitution of a Goods and Service Tax Appellate Tribunal (GSTAT) and its Benches.
• The GSTAT is to be the specialized appellate authority for resolving disputes under the GST laws.
• There are various reasons for the delay in establishment of the GSTAT
  • The qualification and experience criteria of technical members.
  • Number and constitution of Benches
  • Constitution of a search and selection committee.

The absence of GSTAT and its rippling effect

• The absence of the GSTAT in the states has caused a ripple effect in GST administration
  • The aggrieved taxpayer in case of an adverse order from the revenue authorities has to approach the High Court in the writ jurisdiction for relief.
• The High Courts are already burdened with cases and pandemic related delays and such cases increase the pressure on the judiciary.
• In most of the cases, the High Courts lack specialized Benches to deal with GST matters
  • Even if such benches exist it becomes difficult to accommodate the matters on the Board expeditiously, due to the pending backlogs.

Difficulties faced by aggrieved taxpayers

• The aggrieved taxpayer, even with a complete balance of convenience in favour, has no option but to wait for justice.
• Meanwhile the revenue authorities press aggressively for implementation of their own orders and consequent recovery action.
• It stresses the need for establishment of the GSTAT at the earliest.

GoM’s recommendations

• The Union Government set up a six-member Group of Ministers (GoM) to address various concerns raised by the states about the constitution of the GSTAT.
• The GoM is believed to have agreed on the contours and framework of setting up of the GSTAT and its recommendations are to be taken up by the GST Council soon.
• It is expected that the GoM report addresses the concerns of the states and other facets for the establishment of the GSTAT which were challenged before various High Courts.
• The recommendations provide that the principal bench of the GSTAT be set up in New Delhi
  • Large states based on defined criteria such as population, number of GST registered taxpayers etc. will be allowed to set up a maximum of five benches.

The Proposed Structure of GSTAT

• The GSTAT Benches are to be headed by a judge of the Supreme Court or a Chief Justice of the State High Court.
• Now technical members can be appointed without 25 years of experience as this provision has been relaxed.
• The amendment in Section 110 of the CGST Act which is to replace the word “Government” with “State Government '', will allow the states to exercise their jurisdiction to define experience conditions and other methodology to appoint members of the GSTAT.
  • It will open the doors for eligible members of the Bar to be appointed as judicial members
• The selection committee
  • It will be a four-member committee headed by either the Chief Justice of India or his representative judge.
  • This committee will also consist of
    • The President of the GSTAT
    • A Union Government Secretary of appropriate rank
    • The State Chief Secretary of the respective state.
  • The committee will be tasked with the appointment of members to the Benches.

Way ahead

• While the recommendations are taken up for consideration by the GST Council, the deliberations need to be fast tracked.
• The time frame that has already elapsed has made the GST environment for the taxpayer somewhat adverse and unfriendly for business operations with no fault of theirs.
• More delays will create a ripple effect and stutter the working of the GST framework
• Also the necessary but excessive use of the writ jurisdiction to decide cases is also creating additional pressure on an already overburdened justice system and leading to delays in providing relief to genuine taxpayers.

Conclusion

• Therefore taking all these factors into account, the GSTAT has to be established on an urgent basis so that it may have a smooth introduction to the justice dispensation system, any further delays will have cascading effects on pending litigation.

Source: The Hindu BL

Mains Question:

Q. The absence of the Goods and Service Tax Appellate Tribunal (GSTAT) is creating pressure on the already burdened higher judiciary and robbing genuine taxpayers of their legitimate right to seek justice, Elucidate. How will the GSTAT improve the working of the GST framework in India? (250 words).