• Notification Date: 29-04-2021
• Notification No: 07/2021-22

Drastic Change in GST Law. But only a digital GSTAT can be the model for tribunals

The GSTAT would be outside the GST authorities' control. It can protect taxpayers’ rights and revenue interests of the govt.

The Supreme Court recently asked the Narendra Modi government and the GST Council to set up the GST Appellate Tribunal, or GSTAT, without any further delay. It has been four years since the GST law came into force, but the GSTAT is not yet operational. In its absence, taxpayers have had to use the writ route at the high courts, leading to uncertainty in the tax compliance environment.

Centre-states stuck in a stalemate

GSTATs were, in fact, informed soon after the GST Act came into effect, but the process was stopped due to a stay granted by the Madras High Court in September 2019. The crux of the dispute was the GSTAT’s bench composition. It was proposed that each bench of the GSTAT would have three members – two representatives of the Union and state governments, and one person with a background in law or judicial service.

As per the jurisprudence that has evolved on this issue, in the scenario where tribunals now replace the jurisdiction of courts, the bench composition should be such that the number of members representing the executive wing should not exceed the number of members from judicial service. This is to ensure the independence of the dispute resolution body, as tribunals in most cases adjudicate disputes against government departments. Over the last two years, the Union and state governments are yet to resolve this stalemate. Whether lawyers can be excluded from being considered as judicial members is another question under litigation in this matter.

A greenfield opportunity

Irrespective of how the Union and states resolve the issue, it is important to recognise the greenfield opportunity that the GSTAT presents to create a digitally native, next-generation dispute resolution forum that can set the standard for other courts and tribunals in India.

The new GSTAT should build on the Goods and Service Tax Network (GSTN), a live, robust online platform that is already processing a large volume of data. When last checked, it was managing 1.3 crore registered taxpayers who had uploaded about 74 crore tax returns. The GSTN already had workflows in place for both backend and taxpayer interactions. It is important that the GSTAT allows the digital trail to be continued into the dispute resolution forum to be completely online.

The GSTAT is the first dispute resolution forum available to citizens and taxpayers that would be outside the control of the GST authorities. A robust, rule-based tribunal that would operate on a next-generation technology platform is imperative to protect both the taxpayers’ rights and the revenue interests of the Union and the states. 

Given how drastic a change the GST regime has brought in, and the focused efforts that are ongoing in ensuring compliance, it is only inevitable that there will be much litigation in the years ahead. Now is the time to plan and build such a tribunal, before litigations start piling up. It is important to learn from the development of other courts and tribunals, and not go down the same path.

A model for courts, tribunals

The GSTAT should be set up as a completely online, digitally native, next-generation tribunal that would receive the records from the GSTN after necessary checks and balances. Anyone on appeal, either the taxpayer or the department, should only be required to file the appeal memo digitally (with references to documents in the GSTN records) and the records should be automatically transferred to the GSTAT. The responding party would then only have to file its objections to the appeal.

Login credentials of the GSTN could be used at the GSTAT too, allowing notices and documents to be received by the parties as soon as they are filed. Such simple steps can reduce the time spent on a case and provide a significantly higher level of certainty to the process. A digital GSTAT would have a robust, rule-based case management system with dashboards for the judges, the department and the taxpayers. Such a platform could then be used as a model by other tribunals.

For taxpayers, the hassle of producing records and evidence can be reduced, if not eliminated, to a large extent by moving to a digital GSTAT. Clear-cut, rule-based interactions will provide transparency in the process and instil trust in the institution. Certainty of events and case lifecycle would reduce cost and hardship. From a tax administration perspective, department lawyers would be able to access all the records smoothly and present their cases without delay. Tax administrators could also have a quick view of the nature, amount and subject of disputes that would enable data-backed taxation policy and administration measures. Better tax compliance and a judicious tax administration that such a GSTAT would foster would have long term socio-economic benefits.

Besides technology, talent needs to harness a vision

Building such an institution cannot be only about technology. People supervising this new institution will need to share the vision and be committed to change and transformation. That the talent pool, from which the team will be drawn, is common to other courts and tribunals make a high threshold even more of an imperative. There will also be a need to devise re-imagined processes that serve the vision and make full use of technology without falling into the comfort zone of the time-tested and failed methods. Most importantly, the period of transition would have to be handled inclusively, so that all the stakeholders share a common vision.

Here is an opportunity to build a brand new dispute resolution forum right in the first attempt, rather than trying to reform it over the years. The onus is on the GST Council to take this forward.