Next GST Council meet to approve the number of appellate tribunal benches in each state

"The immediate next step will be the final approval from the GST Council on the minute operational details of GST tribunals. This is expected to happen at the upcoming GST Council meeting this month. Thereafter, the enabling legal provisions for the establishment of the tribunal and the necessary rules/circulars would need to be brought into effect/notified – that can happen once all the state legislatures pass corresponding amendments to the respective state GST statutes. Once the legal framework is in place, necessary recruitments of tribunal members, judges, and administrative staff will need to be undertaken, and appropriate budgetary allocations and infrastructural developments/allocations will need to be put in place," Sudipta Bhattacharjee, Partner, Khaitan & Co, told Moneycontrol.

Lok Sabha passed the Finance Bill, 2023, to set up the much-awaited GST Appellate Tribunal. Meanwhile, each state needs to pass the corresponding amendment for the formation of an appellate tribunal.

Given all the steps that remain to be taken, fully functional GST appellate tribunals could probably come into existence towards the close of the current financial year.

"As the amended provisions of Section 109 of the CGST Act do not mention any deadline for the formation of GSTAT, it is anticipated that the entire procedure may take around eight to 10 months till the GSTAT starts functioning," Prateek Bansal, Tax Partner, White and Brief – Advocates & Solicitors, told Moneycontrol.

There will be one principal bench and many state benches. The big states will have two to three benches, Union Territories (UTs) may have one bench; or a bench may cater to more than one state, such as for north-eastern states, the government official said.

The six-member GoM on the appellate tribunal has recommended that states with less than five crore people may have up to a maximum of two benches. No state shall have more than five benches.

"The GST Appellate Tribunal (GSAT), upon formation, would represent the second stage of appeals in GST. Persons aggrieved by the order of the Commissioner (Appeals) can seek redress by making an appeal to the GSTAT. There are many cases that are pending to be filed before this forum. Taxpayers who wish to seek remedy using the GSTAT would need to file their appeals within 90 days of the formation of the GST Tribunal. The operational plan for the setup of the tribunals is under discussion, and it will take some time for these to become operational," tax consulting firm RSM India Director Siddharth Surana told Moneycontrol.

Its establishment aims to provide a specialised forum for taxpayers to seek remedies and clarify issues arising out of the GST laws in India. Inordinate delays in setting up the Appellate Tribunal led to the piling up of unresolved legal disputes. The absence of an appellate remedy led to an increase in the number of writ petitions, Rajat Mohan, Senior Partner at AMRG & Associates, said.

The principal bench in Delhi will look into disputes between the GST department and taxpayers over ‘place of supply'-related issues. There will be four members on each state bench ― two judicial, one central, and one state. The central and judicial members of the benches will be appointed by a selection committee. The selection committee will be chaired by the Chief Justice of India or a judge of the Supreme Court nominated by him. The state member will be selected by a committee headed by a judge of the High Court.

According to Bansal, the business community is vexed by this issue of dual taxation, i.e., the demand for tax by the two states involved in transactions. While supply is considered an interstate activity and IGST is discharged, the destination state seeks to recover tax on the basis that supply is an intra-state activity. So, the constitution of GSTAT would certainly bring relief to the taxpayers by addressing the issues involving two states and helping avoid double taxation.

"Unfortunately, at this stage, the National Appellate Bench is not expected to take up a tie-breaker role vis-à-vis contrary/divergent rulings by state appellate tribunal benches. One hopes that this aspect is seriously reconsidered. Contrary advance rulings under GST have already led to a lot of uncertainty and needless litigation; those learnings ought to be paid heed to and corrective measures adopted vis-à-vis the GST appellate tribunals, especially since we are still at the drawing-board stage," Bhattacharjee said.

Appeals pertaining to disputes of less than Rs 50 lakh and which do not deal with a question of law could be decided by a single-member bench, as per the norms approved by the GST Council, Anchal N Arora, Partner, Felix Advisory, said.

"Today, if a taxpayer is aggrieved by any decision of the GST authorities, he has no option but to knock on the doors of the high courts, which are already overburdened with other cases. Hence, it is critical that the GST Tribunals are quickly set up so that justice is served to taxpayers," tax expert Pritam Mahure told Moneycontrol.

The effectiveness of the GST appellate tribunal will depend on the quality of the judges/members being recruited. The lessons from advance ruling authorities under GST, as well as VAT/Sales tribunals in states, would be relevant. The tribunal is expected to act as a fair appellate authority, adjudicating upon appeals involving disputes on key GST issues on merits and thus paving the path for the evolution of robust jurisprudence under GST laws, Bhattacharjee said.

"Considering the history of litigation regarding the constitution of the tribunals, a challenge to the current provisions cannot be ruled out, especially on the grounds of the ineligibility of advocates from being appointed as tribunal members," Raghavan Ramabadran, Executive Partner, LakshmiKumaran & Sridharan Attorneys, told Moneycontrol.

The formation of the GST appellate tribunal will result in a lot of relief for the trade as well as the GST department. Pending issues will be resolved, giving more clarity on the legal position. It is hoped that the GST appellate tribunal will have sufficient benches to complete the backlog piled up over the last five years and a time limit set on passing judgements, as unnecessary stretching of matters is both costly and harmful for businesses, Parag Mehta, Partner, N.A. Shah Associates, said.