Staying GST Recovery Proceedings awaiting Formation of GSTAT (Find Draft Request Format Here)

The Goods and Services Tax (GST), introduced in India on July 1, 2017, marked a significant overhaul of the indirect taxation system in the nation. By consolidating various central and state taxes into a unified structure, GST aimed to simplify tax compliance, reduce the cascading effect of taxes, and enhance transparency. Despite these commendable laurels, implementation gaps and inconsistencies have posed challenges to both – taxpayers and the department alike.

The Promise of a Singular Indirect Tax Structure GST was envisioned as a “One Nation, One Tax” system to streamline the tax regime and bolster economic growth. The comprehensive framework subsumed numerous taxes such as excise duty, service tax, Value Added Tax (VAT) and others into a single levy, applicable at every stage of the supply chain with seamless input tax credit. Over the years, GST has matured with regular updates, amendments, and feedback-driven changes.

The government has introduced measures to ease compliance, including the simplification of return filing processes, e-invoicing, and the introduction of QR codes. Yet, a glaring issue remains unresolved—the absence of a fully operational GST Appellate Tribunal (GSTAT) solely dedicated to resolving GST-related disputes. Master GST – Expert-Led Courses for Ambitious Professionals, Click Here Read More: GST Council Reviews Procedural Rules for GSTAT Functioning, Awaits Law Committee Examination Dispute Resolution in GST: The Existing Framework Disputes under GST typically originate from disagreements between taxpayers and the department on issues like classification, valuation, or input tax credit eligibility. The current appeal hierarchy is as follows:

A taxpayer dissatisfied with a departmental order may appeal to the Appellate Authority under Section 107 of the GST Act, subject to a 10% pre-deposit of the disputed tax. If the Appellate Authority’s decision is unfavorable, the next recourse is an appeal to the GST Appellate Tribunal under Section 112, requiring an additional 20% pre-deposit. However, the tribunal, a critical body meant to ensure impartial adjudication, remains non-functional due to delays in its constitution. This has left taxpayers and authorities in a legal limbo. Overburdening the High Courts In the absence of a tribunal, high courts across India have become the primary point of recourse for GST-related disputes.

This has led to a significant strain on judicial resources, as courts are now inundated with cases that would otherwise fall within the tribunal’s jurisdiction. High courts, while trying to balance this influx along with regular matters, face a mammoth challenge in balancing these specialized tax matters with their general docket of cases. Master GST – Expert-Led Courses for Ambitious Professionals, Click Here The situation becomes particularly precarious when recovery proceedings are initiated against taxpayers even when statutory remedies like appeals to the tribunal are unavailable. Taxpayers argue that until the tribunal is constituted, recovery should be stayed if they comply with the pre-deposit requirements. This argument has been time and again upheld by several high courts across the country. Read More: Can GST Appeal-Late Tribunal Condone the Unpardonable Delay of 2,706 days in Constitution of GSTAT Judicial Precedents and Relief Measures M/s. Jai Balaji Industries Ltd Versus Joint Commissioner (Appeal) State Tax & Ors. (2022) where the Chhattisgarh High Court held that if a taxpayer deposits 20% of the disputed tax, further recovery should be stayed until the tribunal becomes operational.

This decision underscores the judiciary’s recognition of the taxpayers’ plight due to institutional gaps. Similarly, in Krishna Marndi vs. Additional Commissioner of State Tax (Appeal) CT & GST and Ors. (2021), the Orissa High Court provided interim relief by halting recovery proceedings against the taxpayer after a payment of 20% pre-deposit is made, in light of the non-constitution of the tribunal. The Judiciary has in many isntances played guardian to aggrieved taxpayers, protecting their rights against unscrupulous advancements by the Revenue due to the absence of a dedicated adjudicatory platform and systemic deficiencies. Master GST – Expert-Led Courses for Ambitious Professionals, Click Here The Impending Need The absence of a tribunal not only delays justice but also undermines the efficiency of the GST framework. Taxpayers face uncertainty, potential financial distress, and an erosion of trust in the system.

On the other hand, the government risks revenue losses and a backlog of unresolved disputes. To address these issues, the government must expedite the constitution of the GST Appellate Tribunal. Doing so would not only alleviate the burden on high courts,m but also provide a dedicated forum for resolving GST disputes efficiently. Furthermore, a functional tribunal would enhance taxpayer confidence and reinforce the perception of GST as a fair and transparent tax system. Read More: GSTAT to be in Action by March 2025, confirms Revenue Secretary Conclusion The full potential of the GST regime remains untapped and unidentified due to gaps in its dispute resolution mechanism. The non-constitution of the GST Appellate Tribunal has emerged as a significant roadblock, burdening high courts and leaving taxpayers in a state of uncertainty. Swift action to establish the tribunal is imperative for restoring balance and ensuring the seamless functioning of India’s tax ecosystem. Click the Blue Button Below to Access a Draft Format of ‘Request for Stay on Recovery Proceedings due to Non-Constitution of GST Tribunal

Leave a Reply