GST Appellate Tribunal: Designing an Effective Dispute Resolution Mechanism

The Need for a GST Appellate Tribunal

The Goods and Services Tax (GST) was implemented in India in 2017, but nearly six years later, there is still no appellate tribunal to handle GST-related disputes. This has created significant challenges for businesses and the economy:

• There is no dedicated forum to resolve GST disputes between taxpayers and tax authorities
• High courts are burdened with GST cases that should ideally be handled by a specialized tribunal
• Lack of a dispute resolution mechanism creates uncertainty for businesses
• It negatively impacts India's ease of doing business rankings

As Surya Prakash, Program Director at Daksh, explains:

"When we look at tax, as in any law for that matter, there can't be one authority who implements the law and is the final arbiter of any differences of opinion. Just as revenue has the responsibility to canvas the most accurate interpretation of the law, the taxpayer too has the right to interpret the law as he sees fit to the facts of his case. So it's inevitable that there will be divergence of views leading to disputes and there must be a form of appellate redressal."

Jatin Christopher, Partner at JCSS Bangalore, highlights the current situation:

"Presently as the law stands, the majority of technical members are to constitute the tribunal benches and that's the part that has been objected to. So where we stand today, we don't have a tribunal. High courts of each state have to shoulder this burden as a temporary arrangement."

Impact on Businesses and the Economy

The lack of a GST appellate tribunal is having several negative effects:

• Businesses face uncertainty due to unresolved disputes
• High courts are overburdened with GST cases
• Divergent interpretations by different high courts create confusion
• Dispute resolution is delayed, impacting cash flows for businesses
• It acts as a disincentive for firms to participate in the economy
• Negatively impacts India's ease of doing business rankings

As Jatin explains:

"Today the challenge we all face is that there are matters ripe to be redressed by a tribunal but we are having to only in exceptional cases approach the high court where questions of law are involved. But all other cases are pending. In fact, the government has issued a circular stating that the limitation to file appeals before the tribunal will only commence once the president of the tribunal assumes office."

Key Design Principles for an Effective GST Appellate Tribunal

The experts outlined several important principles that should guide the design of the GST Appellate Tribunal:

1. Citizen-Centric Approach

• Easily accessible, both digitally and physically
• Certainty of hearings and timelines
• Clear processes for filing cases and tracking progress

2. Independence

• Adequate number of judicial members
• Separation from tax administration and policymaking
• Members should not return to executive roles after their tenure

3. Transparency

• Open court proceedings
• Publishing of orders and judgments
• Data on case filing, hearings, and disposal made public
• Robust consultation mechanisms with stakeholders

4. Federal Character

• Balancing interests of union and state governments
• Involvement of both in design and functioning, while maintaining independence

5. Harmonized Jurisprudence

• Avoiding divergent views across benches/states
• Unified national structure to ensure consistency

6. Functional Specialization

• Strong administrative support (HR, finance, technology)
• Possibility of a special purpose vehicle for administration

The Case for a Unified National Tribunal

The experts advocate for a unified national GST Appellate Tribunal, rather than separate state and national benches as currently envisioned in the law. Key arguments in favor of this approach include:

Harmonized Jurisprudence

A national tribunal would help create consistent interpretations of GST law across the country. As Surya explains:

"The advantage of a national tribunal is that the benches will still have an opportunity to have a differing view if the differing view is indeed warranted, but a binding precedence is created. Say okay, we're all part of the same national tribunal, so if a Bombay bench has given a view on this matter, I will have to give reasons as to why I am differing from the Bombay bench, which was not required if it is two different institutions."

Efficiency and Resource Optimization

A single national institution may be more efficient and cost-effective than multiple state-level tribunals. As Jatin notes:

"It may be more efficient to have a national level institution with all of this money. Otherwise, we will anyway - GST collections are contentious - so again to spend a part of that to run an institution, dispute resolution institution, seems to be a drain on the resources."

Alignment with GST's 'One Nation, One Tax' Philosophy

A unified national tribunal would be in line with the original vision of GST as a harmonized national tax system.

Avoiding Legal Challenges

Previous attempts at state-level tribunals have faced legal challenges. A well-designed national tribunal may be more likely to withstand judicial scrutiny.

Potential Challenges and Solutions

While a national GST Appellate Tribunal offers many advantages, there are some challenges to overcome:

Political Economy Considerations

Some states may view a national tribunal as a loss of power or control. To address this:

• Emphasize that tribunals should be independent, not extensions of state tax departments
• Focus on efficiency and resource optimization arguments
• Ensure adequate state representation in tribunal composition and processes

Legislative Changes Required

Implementing a national tribunal would require amendments to the CGST Act and possibly state GST laws. However, as Jatin notes:

"This is not something that's new. It's not like as a country we have very little experience in this. We know how it's to be done. It's just that if the few pieces are agreed by the states, the center, then I think it's sort of templatized."

Balancing Divergent Views

While harmonization is important, the tribunal should still allow for reasoned divergence when warranted. Clear processes for resolving conflicts between benches will be crucial.

Technology and Innovation in Tribunal Design

The experts emphasize the importance of leveraging technology to create a modern, efficient tribunal:

Digital-First Approach

• Online case filing and management system
• Virtual hearings capabilities
• Integrated case management and decision support tools

Data Transparency

• Real-time data on case status, disposal rates, etc.
• Machine-readable publishing of orders and judgments
• Analytics capabilities for identifying trends and bottlenecks

Administrative Efficiency

• Automated workflows for case allocation, scheduling, etc.
• Integrated HR, finance, and other administrative systems

As Surya notes:

"This is a great opportunity to build something new. I hope the policymakers don't pass up this opportunity to reimagine a dispute resolution institution that is resilient and built for the future. It can also make a huge impact on ease of doing business and signal to the world India's leadership in this space."

Conclusion: A Crucial Institution for India's Economic Future

The establishment of an effective GST Appellate Tribunal is critical for the success of India's GST regime and broader economic goals. Key takeaways include:

1. There is an urgent need for a dedicated GST dispute resolution mechanism to provide certainty to businesses and optimize tax administration.

2. The tribunal should be designed with core principles of independence, transparency, efficiency, and harmonized jurisprudence in mind.

3. A unified national tribunal structure offers significant advantages over separate state and national benches.

4. Leveraging technology and innovative administrative structures can create a model institution for the future.

5. While there are political and legislative challenges, they are not insurmountable given India's experience with similar institutions.

6. A well-designed GST Appellate Tribunal can significantly improve India's ease of doing business and showcase its commitment to building robust institutions.

As India continues to refine and optimize its GST system, the creation of an effective appellate tribunal represents a critical next step. By carefully considering the design principles and recommendations outlined by experts, policymakers have an opportunity to create a world-class institution that can serve as a model for other countries and significantly enhance India's tax administration and business environment.

The GST Appellate Tribunal, if designed and implemented effectively, has the potential to not only resolve disputes efficiently but also to shape the interpretation and evolution of GST law in India. This, in turn, can provide greater certainty to businesses, improve compliance, and ultimately contribute to the country's economic growth and development.

As the discussion among experts highlights, the time is ripe for action. With careful planning, stakeholder consultation, and a commitment to building for the future, India can seize this opportunity to create a dispute resolution mechanism that truly embodies the spirit of 'One Nation, One Tax' while respecting the country's federal structure and the principles of natural justice.

Article created from: https://www.youtube.com/watch?v=yFHZ1TuXwq4