GSTATs have been envisaged as the first appellate forum under GST laws. And yet, 7.5 years since implementation of GST, not a single GSTAT is functioning. Reason? Many. Some are easy to identify, others are tough to understand. Nonetheless, here is a small story of the ill-fated GSTATs since the implementation of GST laws in July 2017.
Provision is Declared Unconstitutional
CGST Act, 2017, as originally enacted, provided that the no. of technical members in GSTATs would exceed the no. of judicial members. Both the Union and States wanted to ensure their representation on GSTATs via technical members which led to each GSTAT accommodating at least 2 technical members, i.e., technical member (Centre) and technical member (State). But CGST Act, 2017 provided for only one judicial member on the Bench of GSTAT. The Madras High Court ruled that the strength of technical members in tribunals cannot exceed that of judicial members, as per the law laid down by the Supreme Court. The relevant provision – Section 109(9) as originally enacted – was struck down as unconstitutional. There was a simultaneous challenge on the ground of Article 14 wherein the petitioners argued that under CGST Act, 2017 advocates were not eligible to become members of GSTATs and it violated their fundamental right to equality. The High Court refused to accept this plea and requested the Union to reconsider the ineligibility of advocates. Making advocates ineligible to become members of GSTAT is rather strange since a similar disqualification does not exist for ITATs under the IT Act, 1961.
No Appeal Against the Decision
The Union didn’t appeal against the Madras High Court’s decision. Surprising, since the Union likes to defend all its decisions including its interpretation of tax statutes until the last possible forum. Or perhaps in this instance the Union decided it was prudent to agree with the High Court’s decision. Or it wanted to use the High Court’s decision as a shield to defend the delay in operationalizing GSTATs. Irrespective, the Union’s decision to not file an appeal against the High Court’s decision meant it had to explore options to operationalize the GSTATs. During 2019-2021, the GST Council did discuss the options and feasibility of GSTATs in various States and the required no. of Benches, but the discussions didn’t prove to be immediately fruitful. One possible option of breaking the logjam was by amending the respective provision of CGST Act, 2017.
Provisions are Amended
The Finance Act, 2023 amended the provisions relating to composition of GSTATs. Below are the relevant provisions before amendment and post-amendment respectively:
Pre-Amendment
Section 109(3):
The National Bench of the Appellate Tribunal shall be situated at New Delhi which shall be presided over by the President and shall consist of one Technical Member (Centre) and one Technical Member (State).
Section 109(9):
Each State Bench and Area Benches of the Appellate Tribunal shall consist of a Judicial Member, one Technical Member (Centre) and one Technical Member (State) and the State Government may designate the seniormost Judicial Member in a State as the State President.
Post-Amendment
Section 109(3):
The Government shall, by notification, constitute a Principal Bench of the Appellate Tribunal at New Delhi which shall consist of the President, a Judicial Member, a Technical Member (Centre) and a Technical Member (State).
Section 109(4):
On request of the State, the Government may, by notification, constitute such number of State Benches at such places and with such jurisdiction, as may be recommended by the Council, which shall consist of two Judicial Members, a Technical Member (Centre) and a Technical Member (State).
In summary, the amendments via the Finance Act, 2023 have ensured that the no. of judicial members are equal to technical members, if not more. This is because the President of GSTAT is usually the senior most judicial member. The balance of judicial and technical members needed to be met on two fronts: ensuring balance of representation between the Union and States inter-se needs and the balance between judicial and technical side to avoid executive domination. Now that the initial hurdle to constitute GSTATs was officially removed via Finance Act, 2023, one would have expected speedy and decisive steps towards constitution of GSTATs. But that wasn’t the case.
Benches, Chairperson, Website … and Other Puny Steps
Since the provisions relating to GSTATs have been amended, the Union has taken multiple – but tiny – steps towards operationalizing the GSTATs. With each step, the tax community has raised its hopes for quick operationalization of GSTATs. But each step seems a step too far.
In May 2024, the Minister of Finance administered oath to the first President of GSTAT, New Delhi. Since GSTATs are not yet operational and do not hear cases, I’m not sure what the President of GSTAT does to earn his salary.
In July 2024, in another step forward, the Ministry of Finance notified various Benches of GSTATs, with the Principal Bench in New Delhi.
Recently, the tax community was rejoicing at GSTATs having a dedicated website. It is hard for me to understand the joy of having a functional website for an institution that itself isn’t functional. And the purpose of having a website is difficult to comprehend due to a recent report in January 2025, mentioning that GSTATs will take another 6 months to begin their functioning. When the formalities for appointing personnel have not completed, IT infrastructure is yet uncertain, and real estate for GSTATs has not been finalized, even 6 months seem like an ambitious target. Especially due to the track record of the Union and States on this aspect of GST.
Constitutional Courts are Impatient
Since GSTATs, ideally the first appellate forum for GST-related disputes, are not functioning, the burden has shifted to constitutional courts. High Courts and the Supreme Court end up hearing matters that typically should not have received attention beyond GSTATs. Supreme Court has recognized the effect of not having GSTATs and has recently raised the following query in one of its orders:
We would like to first know at the earliest why the Goods and Services Tax Appellate Tribunal has not been made functional till this date.
The Union is supposed to reply to the above query in three weeks, but do not expect any fireworks and new revelations.
Supreme Court’s question was prompted after it noted that the petitioner had the remedy to file an appeal under CGST Act, 2017 but had to approach the High Court via writ petition due to GSTATs not functioning. Many such cases that did not deserve or should not have been heard by High Courts and Supreme Court are currently in limbo because these constitutional courts do not have the advantage of GSTATs judgments and fact finding.
Previously, the Allahabad High Court also tried to make the Union act quickly. But, despite the High Court’s eagerness to constitute GSTATs in the State of UP, there wasn’t much headway.
Additionally, GSTATs are necessary to ensure harmony in interpretation and coherence in jurisprudence which has, for a long time, been at the mercy of AARs and AAARs. Both are intended to be interpretive bodies, not dispute resolution bodies but their several sub-par interpretations have caused tremendous confusion on various matters.
To conclude, I cannot say for sure when GSTATs will start functioning, but it is imperative that they do. And they function efficiently. A reform such as GST cannot be truly called a bold or a transformative reform until the accompanying rule of law infrastructure is operational. And GSTATs are a vital cog of that infrastructure. Until then, GST has certainly transformed the landscape of indirect tax in India. But, the promise of fair and speedy resolution of disputes remains a distant and unfulfilled promise.