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Abstract

GST Litigation means a unified tax system that has replaced multiple indirect taxes imposed by both the Central and State Governments. This new tax structure grants authority to both the Central and State Governments to impose and collect taxes on goods and services. The primary aim of implementing GST is to enhance the efficiency of tax collection, reduce corruption, and simplify inter-state movement of goods. GST serves as an indirect tax, effectively replacing various indirect taxes in India, including excise duty, VAT, and services tax. The Goods and Services Tax Act was enacted by the Parliament on March 29, 2017, and was implemented on July 1, 2017. GST is levied on the supply of goods and services, operating as a comprehensive, multi-stage, destination-based tax that is imposed at each value addition

 the litigation related to GST including – carry forward of transitional credits from the previous indirect tax system, eligibility for input tax credit on various goods/services and denial of refund claims, non or short payment of output tax liability – comes under the umbrella of GST Litigation.

.Crucial facts about GST

• France was the first country to impose the Goods and Services Tax (GST).
• The GST in India is modeled after the one in Canada.
• The Vijay Kelkar Committee recommended that GST be implemented in India.
• The Goods and Services Tax (GST) was imposed in India on July 1, 2017.
• Assam was the first state to implement the GST.
• GST has appointed Amitabh Bachchan as its brand ambassador.
• The GST was enacted by Article 279 of the Indian Constitution.
• In September 2016, the President of India established the GST Council.
• The GST Council is now chaired by Finance Minister Arun Jaitley.
• The GST Council currently has 31 members.

Important features of GST

• Goods and Services Tax (GST) is a comprehensive indirect tax levied on the supply of goods and services in India. Here are some of the salient features of GST:
• One Nation, One Tax: GST replaced multiple indirect taxes levied by the Central and State Governments, such as excise duty, service tax, value-added tax (VAT), and others. It brought uniformity in the tax structure across India, eliminating the cascading effect of taxes.
• Dual Structure: GST operates under a dual structure, comprising the Central GST (CGST) levied by the Central Government and the State GST (SGST) levied by the State Governments. In the case of Inter-state transactions, Integrated GST (IGST) is applicable, which is collected by the Central Government and apportioned to the respective State. Import of goods or services would be treated as inter-state supplies and would be subject to IGST in addition to the applicable customs duties.
• Destination-based Tax: GST is a destination-based tax, levied at each stage of the supply chain, from the manufacturer to the consumer. It is applied to the value addition at each stage, allowing for the seamless flow of credits and reducing the tax burden on the end consumer.
• Input Tax Credit (ITC): GST allows for the utilization of input tax credit, wherein businesses can claim credit for the tax paid on inputs used in the production or provision of goods and services. This helps avoid double taxation and reduces the overall tax liability.
• GST would apply to all goods and services except Alcohol for human consumption. GST on five specified petroleum products (Crude, Petrol, Diesel, ATF & Natural Gas) would be applicable from a date to be recommended by the GSTC. Tobacco and tobacco products would be subject to GST. In addition, the Centre would have the power to levy Central Excise duty on these products. Exports are zero-rated supplies. Thus, goods or services that are exported would not suffer input taxes or taxes on finished products.
• Threshold Exemption: Small businesses with a turnover below a specified threshold (currently, the threshold is ₹ 20 lakhs for suppliers of services/both goods & and services and ₹ 40 lakhs for suppliers of goods (intra–Sate) in India) are exempt from GST. For some special category states, the threshold varies between ₹ 10-20 lakhs for suppliers of goods and/or services except for Jammu & Kashmir, Himachal Pradesh, and Assam where the threshold is ₹ 20 lakhs for a supplier of services/both goods & services and ₹ 40 lakhs for a supplier of goods (Intra–Sate). This threshold helps in reducing the compliance burden on small-scale businesses.
• Composition Scheme: The composition scheme is available for small taxpayers with a turnover below a prescribed limit (currently ₹ 1.5 crores and ₹ 75 lakhs for special category states). Under this scheme, businesses are required to pay a fixed percentage of their turnover as GST and have simplified compliance requirements.
• Online Compliance: GST introduced an online portal, the Goods and Services Tax Network (GSTN), for registration, filing of returns, payment of taxes, and other compliance-related activities. It streamlined the process and made it easier for taxpayers to fulfill their obligations.
• Anti-Profiteering Measures: To ensure that the benefits of GST are passed on to the consumers, the government established the National Anti-Profiteering Authority (NAA). The NAA monitored and ensured that businesses did not engage in unfair pricing practices and profiteering due to the implementation of GST. All GST anti-profiteering complaints are now dealt with by the Competition Commission of India (CCI) from 1st December 2022.
• Increased Compliance and Transparency: GST aims to enhance tax compliance by bringing more businesses into the formal economy. The transparent nature of the tax system, with the digitization of processes and electronic records, helps curb tax evasion and increase transparency.
• Sector-specific Exemptions: Certain sectors, such as healthcare, education, and necessities like food and grains, are either exempted from GST or have reduced tax rates to ensure affordability and accessibility.
• Accounts would be settled periodically between the Centre and the States to ensure that the credit of SGST used for payment of IGST is transferred by the Exporting State to the Centre. Similarly, IGST used for payment of SGST would be transferred by the Centre to the Importing State. Further, the SGST portion of IGST collected on B2C supplies would also be transferred by the Centre to the destination State. The transfer of funds would be carried out based on information contained in the returns filed by the taxpayers.

Landmark cases on GST laws

Case Details: Union of India v. Mohit Minerals (P.) Ltd. (2022 SCC OnLine SC 657…)

Facts of the Case

The assessee had challenged the IGST levy on a reverse charge basis on the Ocean Freight in respect of the import of goods under CIF contracts for which it was already paying the IGST at the time of import with the value of imported coal under the Customs laws. The Hon’ble Gujarat High Court held that the IGST levy on ocean freight is ultra-vires the levy provisions of the IGST Act. Against the said order, the Government filed the appeal before the Apex Court.

The Apex Court has observed that the ocean freight from a foreign location to a customs station in India in CIF import contracts has sufficient territorial nexus for levying IGST under reverse charge. On an interpretation of Sections 5(3) and 5(4) of the IGST Act, read with Section 2(93) of the CGST Act, the importer can be classified as the ‘recipient’ of the services. On this interpretation, the validity of the notifications levying GST under RCM on ocean freight has to be upheld.

Supreme Court Held

The Apex Court held that there is no legal fiction or power to bifurcate the composite supply into the supply of goods and supply of services and to levy reverse charge GST on the supply of services component under section 5(4) of the IGST Act. Given this, the GST on a reverse charge basis can’t be levied on ocean freight in CIF contracts as it is part of ‘composite supply’ attracting section 2(30) and section 8 of the CGST Act.

Given the above, it was held that the impugned notifications are validly issued under Sections 5(3) and 5(4) of the IGST Act, but it would violate Section 8 of the CGST Act and the overall scheme of the GST legislation as no such power can be noticed concerning interpreting a composite supply of goods and services as two segregable supply of goods and supply of services.

Some crucial sections of the GST act

1                 7    Meaning & Scope of Supply
2	9 Levy and Collection of CGST on Intra-State Supply
3	12  Time of Supply of Goods
4	13 Time of Supply of Services
5	15 Value of Supply of Goods & Services
6	16  Eligibility and conditions for taking input tax credit
7	17(5) ITC is not allowable on certain supplies (Blocked Credit)
8   18  ITC in Special Circumstances

My analysis and view

According to my analysis of the implementation of a fresh act, some disturbances are expected in its first days it is yet to be seen how innovation and the right set of plans can help with new compliances and over the route of expanding the economy.

Conclusion

Managing tax litigation in India, especially indirect tax (GST) litigation, can be a complex and challenging process. However, by staying informed on the latest GST laws, maintaining accurate records, seeking professional advice, and following the steps involved in the litigation process, businesses can effectively navigate GST disputes and minimize the risks associated with non-compliance.

Written by

Kaulav Roy Chowdhury

Footnotes

https://vidhilegalpolicy.in/research/a-fatal-blow-to-the-goods-and-services-tax/

https://irisgst.com/what-is-gst-litigation/

https://blog.saginfotech.com/highly-popular-industry-experts-share-views-over-gst-india

https://tgct.gov.in/tgportal/Docs/Model_GST_Law.pdf

https://www.creditmantri.com/gst-act-and-rules/

https://www.taxmann.com/post/blog/landmark-gst-case-laws/