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The absence of an operational GSTAT has created a vacuum, forcing taxpayers to either withhold appeals or file them before High Courts
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wichayada suwanachun
Recently, the Finance Ministry issued rules for the GST Appellate Tribunal (GSTAT). Developments in this regard have been scattered and consistently delayed. It has been over seven years since India overhauled the indirect tax regime by implementing the Goods and Services Tax (GST). The massive revamp brought forth many new complex questions of law, making settling legal positions imperative.
Owing to GST’s specialised nature, it is pertinent to have a specialised Tribunal for efficiently resolving complex legal questions. Various Law Commission reports and authoritative judgments have reiterated the significance and purpose of tribunals.
Although GSTAT was notified via Notification No. SO 1359(E) on March 13, 2019, its formation was delayed after the Madras High Court, in Revenue Bar Association v. Union of India (Revenue Bar), struck down certain provisions regarding the tribunal’s composition. Key issues included the dominance of technical over judicial members and the eligibility of members from the Indian Legal Services. Instead of addressing these concerns with prompt legal amendments, the government has allowed five years to pass without resolving them.
The absence of an operational GSTAT has created a vacuum, forcing taxpayers to either withhold appeals or file them before the High Courts under Article 226. The High Courts generally grant interim reliefs to the parties without determining the substantial question of law involved.
For instance, the question of the imposition of GST on corporate guarantees furnished by a foreign company to its Indian subsidiaries remains unresolved. Despite interim reliefs from various High Courts, tax authorities continue to issue demand notices in the absence of any clear legal position. Similarly, cases pertaining to 168A, which vested the power with the government to extend filing periods, are having the same fate. This lack of authoritative interpretation leads to inconsistent enforcement.
Even when these courts rule on substantial legal questions, their heavy caseloads lead to significant delays. For instance, the ruling in Mineral Area Development Authority v. M/s Steel Authority of India, which held that the GST should be leviable on royalties paid on mining licences, was pronounced on August 14, 2024, despite this being a contention since the onset of the new tax regime. Such delayed decisions cause loss to the exchequer if they prevent a retrospective effect; otherwise, they burden businesses with unexpected liabilities not accounted for earlier.
Fact-finding authority
Another pertinent challenge is the absence of a fact-finding authority. Section 111 of the CGST Act empowers GSTAT to record and summon evidence. The delay in GSTAT leaves a void, making the determination of facts by the Appellate/Revisional Authority, which lacks judicial independence, final. Challenging these orders under Article 226 does not allow the High Courts to get into fact-finding. Thus, a judicial body must give a judicial stamp to the fact-finding in these cases.
Furthermore, GST runs on a self-assessment model, wherein the taxpayers have to assess their own liabilities. Without clear legal precedents, taxpayers face difficulties in determining liabilities. Additionally, department actions in these uncertain legal positions often require the taxpayer to make partial payments for further relief from Appellate Authorities. This diverts the resources from productive economic activities to unnecessary prolonged litigation. The situation stems from the unavailability of GSTAT to provide a clear position of law in a timely manner.
The prolonged delay in operationalising the GSTAT undermines the very objectives of the GST regime — efficiency, uniformity, and fairness. It has created legal uncertainty, administrative burdens, and economic distortions. The delay on the part of the Government has already caused sufficient losses to the businesses and the GST department.
The issuance of these regulations must now be followed by timely actions and culminate in GSTAT constitution without further delay.
The writer is a student at NALSAR University of Law, Hyderabad
Published on May 5, 2025
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