Bombay High Court Suggests Measures To Reduce Unnecessary GST Litigation

The Bombay High Court has proposed a set of measures to reduce the inflow of needless litigation caused by the non-constitution of GST Tribunals.

The court has observed that a significant number of cases are filed before it due to the lack of an appellate mechanism provided under the Goods and Services Tax law.

Even after six years of GST implementation, the appellate tribunals haven't been constituted, paving the way to numerous litigation before Supreme Court as well as various high courts.

To address this issue, while considering the case of Gulf Oil Lubricants India Ltd., the high court has suggested implementing two measures.

First, to mandate the first appellate authorities to include the provisions of a Commissioner of State Tax, Maharashtra circular, dated May 2020, in their orders.

According to the circular, taxpayers have three months from the time the President or State President of the GST appellate court takes office to file an appeal. However, the taxpayer must inform the state authority within 15 days of the order of their intention to file the appeal. If no such declaration is made, the tax authorities can proceed with the recovery proceedings.

Incorporating this circular will ensure that taxpayers are aware of their remedies and that protective measures automatically come into force without having to approach the high court. This will significantly reduce countless litigations that are clogging the high court.

Second, the high court has directed, if a taxpayer fails to make a declaration by the deadline, they may be granted an additional 15 days to do so.

The court has forwarded these suggestions to the State Commissioner for appropriate action.

This order will help streamline the process and avoid disputes between the taxpayers and the department till the time the GST Tribunal is set up, Abhishek Jain, partner at KPMG India, said. "Similar guidelines may be considered to be issued for pan-India level by the government to reduce confusion in the interim period."

In its previous meeting, the GST Council had reached an agreement to establish a court of appeal. The council accepted a report from the Group of Ministers that suggested the formation of a Goods and Services Tax Appellate Tribunal as the second appellate court under the Act.