DECEMBER 03, 2018

By Dr. G. Gokul Kishore

Press reports are awash with various cases being booked by the GST department against certain taxpayers. By now, the quasi-judicial set-up comprising adjudication and appellate authorities along with GST Tribunal Benches should have been notified. This fourteenth part seeks to highlight the delay in constituting dispute resolution machinery along with two related issues of long-drawn and non-synchronized method of legislating changes under GST.

Constitution of quasi-judicial machinery - Why delay?

Seventeen months have passed since the date of implementation of GST. Availment of credit of forbidden cess in TRAN-1, verification of transitional credit and e-way bill related infractions mean issuance of show cause notice by the GST department. Dispute resolution mechanism starts with departmental adjudication and then travels to appellate authority like Commissioner (Appeals) and then to Tribunal. At the bottom of the pyramid of quasi-judicial hierarchy, adjudicating authorities used to be designated, in the pre-GST regime, based on monetary powers commensurate with designation / rank. No such instructions have been issued by CBIC or State tax authorities so far. Then, notifications are required prescribing jurisdiction for Commissioner (Appeals) as the jurisdiction of such authority extends over multiple Commissionerates. Such notifications are yet to be issued. As per recent amendments, even middle level officers like Joint Commissioner will have appellate powers and, therefore, more such notifications may be necessary.

As per Section 109 of CGST Act, GST Appellate Tribunal is to be constituted which will comprise of National Bench with Regional Benches and another set of State Bench along with Area Benches. Though GST Council has reportedly recommended setting up of such Tribunal, notification to this effect is yet to be issued. With the challenge to the provisions pending in certain High Courts, constitution of such bodies is bound to be a procrastinated process. If there is no clarity on adjudicating authorities, appellate authorities and the Tribunal after 17 months, for every show cause notice or an order passed by some authority, the aggrieved party has to approach the High Court invoking writ jurisdiction. We know writ remedy is discretionary and such jurisdiction is exercised by High Court with great circumspection and not routinely. This effectively means, as on today, taxpayers have no effective alternative appellate remedy against actions taken by departmental officers.

Normally, bureaucracy is seen as expansionist ('Parkinson's law') as it tends create structures to execute functions and increases functions to further establish structures. Revenue bureaucracy is no exception if one compares the Collector of Central Excise of yester years with the present day numerous Commissioners (with various prefixes like 'Principal', 'Chief', etc.). If Commissioners are more in number, then subordinate officers swell. It is surprising, therefore, to see the delay in constituting / notifying the adjudicating and appellate authorities as this is an avenue to have more Commissioners and his retinue. It is time that the notifications are issued and taxpayers are provided clarity on the quasi-judicial dispute resolution mechanism and High Courts are not burdened.

GST law - Effective dates vary from State to State?

With the concurrent taxing powers vested by the Constitution on the Union and the States (through the respective legislatures), for every notification relating to CGST issued by the CBIC (Central Government), all States need to necessarily issue corresponding notification for the purpose of SGST. After issuance of a particular notification by CBIC which normally includes amendment to rules (CGST Rules), in most cases, there is considerable delay in issuance of notification to effect amendments to SGST Rules. In general, notifications are effective from the date of publication in gazette which is date of issue for all purposes, except those where date of effect is separately mentioned. If a particular CGST notification is to be effective from a particular date and on which at least a few States have not come out with their notifications, it not known how the Central notification will be given effect in such State. Taxpayers generally tend to follow CBIC's notifications and there may well be audit objections that taxpayers have followed something which was not the applicable law in their State during the relevant period.

Both Centre and States should ensure that issuance of notifications are coordinated so that both CGST and SGST notifications are issued on the same date and to be effective from a specified future date to provide time for the trade to prepare itself. The time given may even be 2 or 3 days but the same is necessary given the comprehensiveness or base of GST regime.

In the recent times, we are witnessing extension of last date for filing certain GST returns and such notifications are issued after the expiry of the statutory due date. Such extension will, therefore, be a reward to non-filers and in a way, penalty on those who comply on the due date. Ideally, extension of last date should be notified before the due date prescribed in the statute. These instances may be seen as minor aberrations but they do shake the morale of honest taxpayers. We only hope that CBIC takes note so that such practices are avoided.

GST law amended - Effective date to eternally wait

CGST Act was amended in August this year. Certain provisions were given retrospective effect from 1 st July, 2017 while most of the other amendments like those relating to input tax credit are to be effective from a date to be notified. Such notifications are yet to be issued and, therefore, many of the amendments (some beneficial to taxpayers) have not yet come into force. It is believed that the delay is attributable to certain States having not passed SGST Act amendments yet and till the time all States have amended their SGST law, the amendments already made to CGST Act cannot be notified.

GST Council is a great experiment in cooperative federalism but such experiments will be of least relevance to taxpayers if the Council is not able to ensure that the changes recommended by it are not brought into force swiftly from a particular date. Legislation is a sovereign function but the Council can prevail upon the State Finance Ministers in its meetings to cut delay in notifying amendments and ensuring uniformity in implementation. If changes to GST law is such a long-drawn process, then it should be a very comprehensive exercise as any amendment left unattended in one round may have to wait for years. As the GST system is on course of stabilisation, we hope the Council and the tax administration will take action on this front in this second year of GST.

(…To be continued)

[The author is an Advocate and Joint Partner, Lakshmikumaran & Sridharan, New Delhi. The views expressed are personal.]

See Part XIII