Litigation Process
- Intelli Tax Advisors
- Jul 16
- 3 min read
Litigation Process under GST
The litigation process under the GST regime deals with disputes that arise between taxpayers and the tax
authorities regarding interpretation, classification, valuation, input tax credit (ITC), refund, penalties, or any
other procedural or substantive aspects of the GST law. GST litigation follows a structured hierarchy and
involves several stages:
1. Origin of Disputes
GST litigation typically begins from:
Audit or inspection by the department (Section 61, 65, 66, 67 of CGST Act).
Mismatch in returns, non-compliance, or suspicion of tax evasion.
Denial of Input Tax Credit (ITC) or refunds.
Show Cause Notice (SCN) under Section 73 (non-fraud cases) or Section 74 (fraud/willful misstatement/suppression).
2. Adjudication by Proper Officer
After the issue of a SCN:
The taxpayer is given an opportunity to respond and present arguments.
An adjudication order is passed by the adjudicating authority.
The order may:
Demand tax, interest, and penalty.
Reject or partially allow refund claims.
Disallow ITC.
3. First Appeal – Appellate Authority [Section 107]
If aggrieved, the taxpayer can file an appeal before the Appellate Authority.
Time Limit: Within 3 months from the date of communication of order.
Pre-deposit requirement:
o 10% of disputed tax amount (maximum ₹25 crore).
o In case of appeal by the department, no pre-deposit.
The Appellate Authority can confirm, modify, or annul the order.
4. Second Appeal – Appellate Tribunal [Section 109 – 113]
The next level is the Goods and Services Tax Appellate Tribunal (GSTAT).
Constitution:
Principal Bench (Delhi)
State Benches in each State/UT
Features:
Headed by a Judicial Member and a Technical Member (Centre/State).
Deals with issues involving substantial questions of law.
Filing:
Within 3 months from the date of Appellate Authority’s order.
Pre-deposit of:
o Full tax admitted.
o 20% of remaining disputed tax (in addition to earlier 10%).
5. High Court [Section 117]
If GSTAT order involves a substantial question of law, an appeal lies with the jurisdictional High Court.
Filed under Article 226/227 of the Constitution or under statutory provisions.
Key Points:
No mandatory pre-deposit.
Time limit: 180 days from communication of GSTAT order.
6. Supreme Court [Section 118]
Appeal to the Supreme Court lies:
o From the High Court’s decision.
o Or directly from the GSTAT in case of matters relating to place of supply (Article 131 read with Section 117(2)).
Other Remedies & Forums
Advance Ruling Mechanism (Sections 95–106):
Seeks clarity on classification, valuation, ITC, etc.
Binding on the applicant and department.
Revisional Powers (Section 108):
Commissioner may revise subordinate orders if prejudicial to revenue.
Alternative Dispute Resolution (ADR) under GST
As of now, ADR mechanisms like mediation, conciliation, or settlement commission are not formally
part of the GST framework.
Some provisions (like Advance Ruling) provide limited scope for avoiding litigation.
Recent Developments
GSTAT Functional: As of 2024–2025, the Government has made GSTAT operational in multiple states to handle the backlog of second appeals.
Digitization: e-Adjudication and e-Appeals modules are being introduced on the GSTN portal.
Judicial Trends: Courts are emphasizing natural justice, proportional penalties, and avoiding harassment of taxpayers.
Challenges in GST Litigation
Complexity and ambiguity in law.
Frequent amendments and lack of consistency in notifications.
Divergent advance rulings in different states.
Delay in tribunal constitution (now being resolved).
Conclusion
GST litigation is an evolving process that combines administrative adjudication with judicial oversight. While the legal framework under GST is fairly comprehensive, practical challenges persist. Efficient dispute resolution will depend on the consistency in law interpretation, proactive department engagement, and robust functioning of appellate forums like GSTAT.
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