GST- Rain check on Justice Delivery – July 2021

02-07-2021 CA Madhukar N Hiregange

GST was undoubtedly the biggest indirect tax reform in India on paper.  The vision was of transformation of the mindset, best international principles, simplified, easy to comply law with least amount of intervention. It should have given an additional push to the trad/ industry.

However, the hurried implementation, poor drafting, 1000s of changes by way of notifications/ circulars, untested technology, no change management of worth have whittled down its advantages significantly.

The objective as far as disputes were concerned and the ground reality after 4 years is (as understood being an involved practitioner & author of GST books) as under:

  1. Compromise of the 3 Pillars of Democracy: The Legislature has excessively delegated its powers and GST issues now come at footnote- not to be discussed or deliberated. Atrocious provisions and illegal actions from top to bottom in the CBIC which fly in the face of Article 14 (equality), Article 19 (Freedom to do business), Article 21 (Protection of life and Liberty), Article 265 (Tax only by authority of Law), Article 300A (No deprivation of property without authority of law) are a serious concern.

The judiciary is compromised as the CESTATs not working adequately (cases from 2011 pending), all orders prejudicial to revenue are invariably escalated to the Supreme Court leading to loss of confidence. On the ground AAR/ AAAR are the law of GST.

The promises of no retrospective amendment is gone with the wind with Industry/ trade planning for possible retrospective amendment. Foreign investors opting to go elsewhere.

Many important functions of the parliament now with the executive- Fitment Committee and Tax implementation Committee – both controlled by the CBIC.  


  1. Greater Tax Certainty: The major components of GST are:
  1. Single rate for goods and services did not happen. Rate issues settled in the Central Excise era have arisen in a big way due to wide variance within common type of goods as well as end use-based differences.
  2. The taxation of transactions without consideration between the same PAN where over all there is no revenue loss, supplier discounts to buyers considered as services by distributor etc, have added to valuation disputes.
  3. The myopic restriction to tax credits continuously being amended with procedural complexity/ impossibility has led to Courts favoring the concept that ITC is a right on several counts including the transitional provisions.
  4. The incorrect option of IGST instead of SGST + CGST and vice versa which could have been done by
  5. The place of supply has added complexity even for transactions within India.


  1. Reduced Litigation & Expeditious Disposal of Disputes: The proposed measures were:
  1. GST Council was to independently function to make important suggestions. Even today there is no Vice Chairman, and it meets infrequently to decide on noisy issues. Fundamental issues have been put under the carpet. The executive is defacto running the GST Council.

The Fitment Committee/ Law Implementation committee are run by the executive and GSTC normally forwards the recommendation.

The objections of the State FMs and even the Joint Parliamentary Committee are summarily dismissed giving illogical reasons.

  1. The officers of the erstwhile VAT, CE & ST department have not gone for an effective change management which is a prerequisite for success of GST. Graft in areas of e-way bill squads, refunds has continued as on date. Goods moving across the length & breath of the country without documentation through preferred identified transporter is a fact on the ground. Those who misuse the system by non-payment of tax has reduced but still a big menace. If there a political, mafia, transporter nexus is a question to be addressed by the parliament.
  2. The GST network work was to carry forward the law- however due to lack of coordination between CBIC and also frequent changes- with need of hurried enablement has led to no user testing. Consequently, GSTN glitches are now being accepted and “jugad” done for uploading in any way.
  3. Use of Information technology to reduce interaction with tax authorities has been successful in large measure with even faceless hearing taking place.
  4. The old disputes resolution to enable start on clean slate in GST has been a mirage. Even today matters of 2011 (10 years) are before the Tribunals which suffers from – lack of Tribunal members, meeting infrequently- more or less a tick box approach on disposals.
  5. The promise of not tinkering with the law and the rules frequently can be decided based on the fact that we have 600+ notifications and equal number of Circulars. Most amendments and clarifications are to deny benefits and seem focused only to garner more revenue of empower the executive. Basic law reforms have been put on backburner.
  6. The GST AAR & AAAR were to resolve doubts quickly. The ground reality is:
  1. The majority of member (JCs- Stated) deciding are generally not very knowledgeable nor have judicial experience.
  2. Many of them are not following judicial discipline – may be also due to lack of knowledge and indoctrination of how to dispense justice.
  3. Especially low level of understanding of services among the State Officers.
  4. Seem unaware / or not sensitised on the need to avoid divergence with the Constitution of India.
  5. Many seem untutored in Legal maxims (which any judge should know)
  6. Most not aware of landmark settled position of law. (past)
  7. Most rely on circulars which are not good law- only binding on the executive.
  8. Those occupying these critical posts are not specifically trained and more importantly not evaluated.
  9. There asre contrary ruling between the States at times and the National Authority has still not been constituted.  
  10. The AAR/ AAAR’s have lost their credibility due to the above reason and the fact that there is a palpable revenue bias. Many experts refer to this authority as the Authority for Adverse Ruling!
  1. The appellate and revisionary authorities for dispute resolutions not in place till date!
  2. The GST Tribunals similarly are also in a limbo.


  1. Cost of Compliance – low for taxpayer / Executive: Since several laws combined, it is definitely an advantage. However, due to complex procedures and graft continuing there is room for further reduction.


  1. Greater transparency: There is a much larger transparency generally. However, the matters before the GSTC, Fitment Committee, Tax Implementation Committee is not available and RTI replies are evasive. Refunds which are the bedrock of the GST principal impacting the exporters as well as those eligible for inverted duty structure.


Therefore, the conclusion is that unfortunately - Justice under GST going downhill very fast as far as GST is concerned. This is resulting in:

  1. Trust in system getting eroded day by day
  2. Foreign Investors shying form long term investment
  3. Tax administrators having distrust, disbelief of tax payer leading to apparent cynicism.
  4. Corruption which had significantly reduced initially starting to grow.
  5. Tax compliant also looking at ways and means for taking take of “graft” and uncertainty.
  6. GST disputes expected to increase substantially due to poor quality of orders at AAR. AAAR , settled matters of classification, valuation, tax credit being unsettled – filed officers using ruling right left & centre. Mass notices without application of mind with the ultimate result being the same as it used to be in pre-GST era.


Possible Solutions/ Way Forward

  1. The roles/ duties, responsibility & authority between the Parliament, Judiciary & Executive be clearly demarcated and implemented. No usurping of powers allowed (rededicate to COI and interest of India) and maintained.
  2. GST Council be truly independent or closed immediately.
  3. All matters/ representations submitted to GSTC outstanding from 2017 to be disclosed openly. Promise of transparency be backed by action – not rhetoric’s.
  4. Parliament to take time, effort to understand and pass GST amendments considering the objectives stated initially.
  5. Law to provide for dealing with corrupt officers who cause substantial leakage and excessive nuisance. They need to be booked and penalised/ punished, put in jail for serious offenses.
  6. Important posts to have trained, evaluated, capable officers who have accountability.
  7. AAR/ AAAR to include retd. Judges/ Tribunal members. National Tribunal to be put in place. Preferably working under the law ministry to provide independence necessary.


The despondency of the SME, professionals in resolving problems in dispute avoidance by way of good compliance can be reversed by implementing the above suggestions in earnest. Looking forward for proper time bound reforms to bring back India as a country having simple, fair and transparent GST. Feedback: [email protected]