With the creation of a national bench of the GST Appellate Tribunal, indirect tax disputes are likely to be resolved and these will predominantly deal with “place of supply” issues
By Sumit Dutt Majumder
Dispute resolution is an essential element of any taxation system. Like all other taxation laws, GST laws also provide for dispute resolution. There are two broad classes of dispute regarding GST. One is between taxpayers and central and state GST authorities, and the other is between the centre and state GST authorities or among the different state GST authorities.
In disputes between taxpayers and taxmen, during the pre-GST regime, these were first adjudicated by the jurisdictional tax authority. An aggrieved party, either the taxpayer or the tax authority, could first appeal to the Commissioner (Appeals). If the grievance was not redressed, the appeal could go to the Central Excise and Service Tax Appellate Tribunal (CESTAT).
Since GST has come in, disputes between taxpayers and tax authorities are first adjudicated by the earmarked authority, i.e. either Central GST (CGST) or States GST (SGST) for a particular GST taxpayer. It may be recalled that it was decided in the beginning that a particular taxpayer would interact with only one tax authority, either the centre or the concerned state where he was registered. If still aggrieved, GST laws provide for a second platform of appeal through dispute resolution tribunals. Section 109 of the CGST Act mandates the formation of these tribunals.
In July 2018, the GST Council recommended the setting up of a national bench and three regional benches of the aforesaid appellate tribunal.
Based on this recommendation, the cabinet on January 23 decided to set up a national bench of the GST Appellate Tribunal (GSTAT) in Delhi. Decisions on regional, state and area benches will follow in due course. GSTAT will be the second forum of appeal for disputes between taxpayers and tax authorities. It will not settle disputes between the centre and states as has been made out in certain quarters.
GSTAT will have a president who will be assisted by two technical members, one representing the centre and the other the states. There was a suggestion by some people that there should be a member (judicial) from the judiciary to counter the possible revenue bias by two technical members. This concern can be taken care of by mandating that the president be from the judiciary instead of having another member.
It had further been announced after the cabinet meeting that GSTAT would deal with disputes that arise predominantly out of “place of supply” issues.
A view was expressed that a taxpayer can approach GSTAT only in cases where at least one of the issues of contention pertains to the place of supply.
It is difficult to subscribe to this view. The word “predominantly” cannot be understood as “exclusively”. First, it is essential to know whether the supply of goods and/or services is intra-state or inter-state. If the “location of the supplier” and “place of supply” are in the same state, it will be intra-state supply.
However, if they are in two different states, it will be inter-state supply. In the first case, the taxpayer would pay CGST that will accrue to the centre and SGST which will go to the concerned state. In the second case, the taxpayer would pay Integrated GST (IGST) which is basically a combination of CGST and SGST. Here, while CGST would accrue to the centre, the SGST amount would accrue to the destination state. Determination of the destination state when there is a movement of goods from one state to another will depend on the “place of supply”. GST laws have provisions on how to determine the “place of supply” in various circumstances.
Given the inherent structure of IGST, it is expected that there will be many disputes on the issue of determination of “place of supply”.
This must be the reason for using the expression “predominantly arising out of the place of supply issue”. But it can in no way be construed as restricting the scope of GSTAT only to “place of supply” issues. It is only around a year and seven months since GST was implemented. As time passes, we will see more issues which will require a final decision from GSTAT that would be applicable for the entire country.
Another confusion seems to have been created by reports that GSTAT has been set up to settle cases of Advance Ruling, particularly where there are divergent orders by the Authorities for Advance Ruling (AARs) at the state level. It may be recalled that AARs were set up in the GST regime to bring certainty in the tax that a taxpayer has to pay.
But in practice, there were many instances of divergent orders by different AARs of different states. Industry started demanding a centralised AAR to reconcile the contradictory verdicts of different AARs. This led the GST Council to decide in its December 2018 meeting to establish a centralised AAR. However, the statements made after announcing the decision to set up GSTAT do not indicate that it will also take up the role of the centralised AAR. It will no doubt be useful if GSTAT is given this responsibility as well instead of having one more authority. One will have to wait for clarity on this matter.
As for the resolution of GST-related disputes between the centre and states, it was originally thought that there will be an independent Dispute Resolution Authority headed by a retired judge and it will have eminent persons from the center and states as its two members. But this was not accepted by many states, and finally it was decided that as and when the dispute arises, it will be the responsibility of the GST Council to find ways and means for resolution of centre-state disputes. Now that considerable time has passed after the introduction of GST, it would be advisable to finalise beforehand a suitable scheme or model as to how GST related disputes will be resolved.
While it is commendable that a beginning has been made in setting up a national bench of GSTAT, decisions on unresolved issues discussed above will also go a long way in making things easier for taxpayers as well as taxmen.
—The writer is former chairman of CBEC and author of the book, GST Explained for Common Man