GSTAT: Relaxing retirement age, eligibility criteria of members to bring efficiency, say tax experts

GSTAT to be better than CESTAT, experts say

Tax experts have welcomed the government’s decision to raise the retirement age and relax the eligibility criteria of the members of the much awaited Goods and Services Tax Appellate Tribunal (GSTAT).

On December 20, the parliament passed the Central Goods and Services Tax (Second Amendment) Bill, 2023, making way for the establishment of the GSTAT. The bill raises the cap on age for the president and members of the GSTAT to 70 years and 67 years, respectively. Currently, the age limit for the president is 67 years and for members is 65 years. The bill also seeks to align the provisions of the Central GST Act with the Tribunal Reforms Act, 2021.

As per the bill, an advocate with 10 years of 'substantial experience' in litigation in matters relating to indirect taxes in an appellate tribunal would be eligible to be appointed as a judicial member of the GSTAT.

“This is certainly a positive step by the central government as lawyers with experience of 10 years and more in the field of indirect taxation can certainly be an asset in the justice delivery system and enhanced retirement age gives ample time to the members (both judicial & technical) to adjust to the environment and be better equipped to handle the complex litigation,” said Rupender Sinhmar, partner at law firm BSM legal and a central government counsel.

According to Sinhmar, the government can now consider appointing retired judges and members of erstwhile regime (CESTAT members) and retired IRS officers with ample experience in both field formation and adjudication/appellate authorities.

Charanya Lakshmikumaran, Partner at Lakshmikumaran and Sridharan Attorneys, noted that this move would enable a large pool of qualified people to join the GSTAT which shall ensure effective disposal of matters.

GSTAT to have more strength than CESTAT

The GSTAT is expected to have a total of 31 benches across India, a stark departure from the government’s policy on its predecessor Customs Excise Service Tax Appellate Tribunal (CESTAT), which has a total of nine benches across the country. With over 80,000 pending cases as of March 2023, CESTAT has frequently been criticised for the slower disposal of cases and large pendency.

Chandrashekara Bharti Venkatraman, a central government counsel, said, “In a huge country like India, expansion and technology might address the concern of pendency. With 31 benches now adjudicating Disputes, most likely with VC facilities, the aspect of pendency might reduce.”

While the tribunal, which is expected to be established close to 7 years after the GST law came into force, is bound to see a large number of cases in the near future, it is likely to reduce in the long run as the tribunal starts clarifying the law. Not notifying the GST tribunals led to a flurry of litigations in high courts. According to a parliamentary response from March 2023, the ministry is fighting over 1.5 lakh cases across India.

Lakshmikumaran said, “The substantial increase in the number of benches across almost all States/UTs would make the access to justice easier and cost-effective. Besides, this would ensure that the number of matters is evenly distributed across benches which would increase the disposal and thereby, reduce the pendency.”

Government must recruit members for GSTAT on a war footing

A common problem plaguing tribunals in India is the lack of members to hear and adjudicate cases, leading to pile-ups. For instance, practitioners at the Debt Recovery Tribunal (DRT) had to move the Supreme Court in 2020-21 owing to a lack of members.

In late 2021 and early 2022, the Supreme Court asked the then Attorney General KK Venugopal to apprise them of the situation in DRTs. Though the government has informed the SC that most of the vacancies in DRTs have been filled up, the tribunals continue to be plagued by pendency.

Experts have urged the government to avoid such a situation in GSTAT and ensure that the tribunal is sufficiently staffed. Sinhmar said, “Appointments should be made by the government on a war footing and tribunals should be made operative at the earliest as it has been more than 6 years since GST was introduced. Secondly, these tribunals should operate with complete strength in one go instead of appointments in a phased manner.

Amit Gupta, Partner at Saraf and Partners, noted that in the past the issues with tribunals mainly emanated from administrative problems such as inadequate benches and members. He said, “It is imperative that the government exercises the discretion provided under the provisions of the GST law and put in place adequately staffed benches to keep a check on the backlog of cases.”

Rohit Jain, partner at Economic Laws Practice,  said “Timely formation of enough benches depending on the pendency of the matters is key for ⁠diligent and regular functioning of the tribunal.”