The Goods and Services Tax (GST) was introduced with a stated objective to rationalise the indirect tax ecosystem of India creating a common national market for goods and services. 'Ease of doing business', economic growth and price rationalisation were the cornerstones of this 'one nation-one tax' initiative. The success and effectiveness of tax reforms largely depend upon a robust dispute settlement system, which caters to efficiency in the disposal of disputes, while keeping litigation costs low.

Under GST, disputes arise from differences in tax paid by the assessees and the computation of tax liability by authorities. Such tax disputes can arise due to various reasons during assessment, audit and/or scrutiny of records/accounts, viz. rate of tax, a claim of tax exemption, the claim of an input tax credit, incorrect determination of place of supply, nature of supply (composite or mixed supply), classification of goods and services, etc. While GST is touted to remedy the proliferation of tax disputes and simplify tax administration, early experiences point to the contrary.

Authorities and taxpayers continue to position themselves in the opposite; the contour of litigations suggests that the fundamental plank of disagreement indicates to past trends. Disputes on an interpretation of the law, unsatisfactory advance ruling mechanism and revenue-centric approach by tax authorities have proliferated litigation. It thus becomes inevitable that a suitable mechanism is implemented, including necessary policy interventions, to arrest the trend. A few such measures are enlisted below.

It appears that the Government is considering a GST dispute settlement scheme for affording a one-time opportunity for businesses to settle tax cases. It is understood that the proposed scheme will not cover wilful tax evasion and offenders against whom the enforcement agencies have initiated scrutiny. It is expected that the proposed scheme is likely to be along the lines of the Union Government's 'Sabka Vishwas Scheme' of 2019, which sought to resolve all legacy disputes relating to erstwhile Service tax and Central excise.

GST appellate tribunal
Even after five years of GST, the Goods and Service Tax Appellate Tribunal (GSTAT) is yet to see the light of the day. In the absence of GSTAT, taxpayers are compelled to approach High Courts causing further pressure on an already overburdened justice system and leading to delays in the administration of justice to genuine taxpayers.

From the taxpayer's point of view, even for completely justified tax positions, they have no option but to wait for a remedy. Further, the non-constitution of the Tribunal is leading to an increase in interest burden, delay in genuine refunds, pre-deposit of taxes leading to cash flow challenges and repetitive show cause notice to cascade disputes. Immediate formation of GSTAT and expeditious resolution of disputes is the need of the hour.

Authority of advance ruling under GST
Authority of Advance Ruling (AAR) was formed to provide certainty in tax positions in advance to reduce litigation. AAR and the Appellate Authority of Advance Ruling (AAAR) are constituted under the respective State GST Acts. Thus, the ruling given by the AAR or AAAR may not be accepted by authorities in other States. Further, the AAR lacks the power to deal with every aspect of the GST law, such as issues related to 'place of supply' which has been an area of doubt for many.

AAR or AAAR shall be binding only on the applicant, who has sought the advance ruling and on the concerned /jurisdictional officer in respect of the applicant. However, divergent rulings in different states on the same matters, have led to increased litigation. The Government and the GST Council should form a central authority for AAR, which could address the issues relating to 'Place of Supply' and resolve conflicting views of State level AARs.

Importantly, the revenue-centric approach of the AAR has dented the confidence of the taxpayers and even on matters where a reasonable interpretation is apparent, the ruling has been adverse to the taxpayer. It is time that confidence in AAR is restored, in order to serve the object and purpose of this progressive move.

The Alternate Dispute Resolution (ADR) mechanism is a channel for resolving disputes between taxpayers and the Government without resorting to formal litigation. While Advance Rulings can be a form of ADR, if the constraints of AARs as discussed above are addressed, the same may go a long way in reducing unwarranted litigation. Similarly, the introduction of the Settlement Commission with an objective to expedite the collection of taxes locked up also allows the delinquents to come clean as a one-time option to substantially reduce the time and cost involved in unproductive litigations. The possibility of arbitration and mediation, as a medium of dispute resolution, can also be explored.