Fixing GST: Why Parliament, Not Courts, Must Ensure Certainty

GST and the Supreme Court-When One Nation, One Tax Becomes One Nation, Endless Litigation

By P SESH KUMAR

NEW DELHI, August 18, 2025 — The Supreme Court’s recent ruling in M/s Armour Security (India) Ltd. v. Commissioner, CGST, Delhi East Commissionerate & Anr. was hailed as a relief for taxpayers harassed by overlapping investigations from Central and State GST authorities. But the fact that such a case had to reach the Apex Court at all says more about the sloppy drafting of the GST law than about judicial brilliance. Ambiguities in key provisions, particularly Section 6(2)(b) of the CGST Act, created scope for turf wars, needless harassment, and avoidable litigation.

This narrative argues that the judgment is a band-aid over a deeper wound: India’s tax reform was meant to simplify, yet poor legislative craftsmanship and constant amendments have ensured a cycle of confusion, courtroom battles, and chronic uncertainty.

The Armour Security Case: A Snapshot

The controversy arose when a Delhi-based company providing security services found itself caught between two arms of the taxman. First came a show cause notice demanding over ₹1.24 crore for under-declared turnover and excess ITC. Then followed a search, seizure of devices, and multiple summons to directors. The company argued that this violated Section 6(2)(b) of the CGST Act, which bars initiation of proceedings on the “same subject matter” by different authorities.

The Delhi High Court brushed this aside, holding that summons or searches are not “proceedings.” The company escalated the matter, and the Supreme Court finally stepped in to draw the lines. The Court clarified that:

• A “proceeding” formally begins only with a show cause notice, not with summons or searches.
• Audits and scrutiny of returns can only be initiated by the authority assigned to the taxpayer.
• Intelligence-based enforcement can be carried out by either Central or State authorities.
• Once a show cause notice crystallizes liability, another authority cannot initiate parallel proceedings on the same subject matter.

In short, the Court shielded taxpayers from double jeopardy, while preserving the enforcement teeth of the department.

Why Did This Need the Supreme Court?

The real puzzle is why such a basic question — who can investigate and when — needed the Supreme Court’s intervention in the first place. The answer lies in the mischief of legislative drafting. Section 6(2)(b) used woolly terms like “proceedings” and “same subject matter” without defining them. Was a summons a proceeding? Was a search? What if the liability was similar but arose from different infractions? The law was silent, leaving it open to contradictory interpretations by taxpayers and tax officers alike.

This ambiguity created fertile ground for harassment. Taxpayers faced duplicate notices, and departments wasted resources chasing the same trail. Instead of the much-promised simplification, GST turned into a lawyer’s paradise. Predictably, the judiciary had to step in to fill the gaps.

A Pattern of GST Litigation

The Armour Security case is no outlier. Ever since GST’s birth in July 2017, courts have been asked to resolve disputes that should have been settled in the statute book itself. Consider a few examples:

• Transitional Credit Chaos: The law on carry-forward of pre-GST credits was so poorly framed that High Courts across India were flooded with writs. It took years, and eventually the Supreme Court in 2022, to extend relief.
• Anti-profiteering: Vague provisions on passing tax benefits to consumers led to an avalanche of litigation, with the National Anti-Profiteering Authority becoming notorious for arbitrariness.
• Arrest Powers: The power to arrest under GST was left so wide that even the Supreme Court had to step in to balance liberty with enforcement.
• E-way Bill and Procedural Technicalities: Countless cases arose because minor technical lapses (like clerical errors in e-way bills) were treated as tax evasion.

Each of these disputes was not about the philosophy of GST but about poor drafting, rushed amendments, and failure to anticipate ground realities.

The Amendment Overdrive

One of GST’s biggest ironies is that it was sold as simplification, but has since spawned a flood of amendments. In just eight years, the GST Council and Parliament have rolled out more changes than the average taxpayer can keep track of. Now, the government is preparing to usher in two main slabs — 5% and 18% — while hiking sin goods to 40%. On paper, this may look like rationalisation, but experience shows that each amendment breeds new disputes.

Take the classification debates. When the government tweaks rates, businesses are left to fight over whether a product is a “snack” or a “meal,” a “biscuit” or a “cake.” The infamous cases on popcorn, parottas, and ice cream under GST mirror the earlier excise-era battles over whether potato chips counted as “manufactured goods.” History repeats itself because the drafting repeats its vagueness.

Each amendment without precision adds to the load of litigation. And every time, taxpayers must run to the higher judiciary, wasting judicial hours on what should be administrative clarity.

The Cost of Ambiguity

The cost of such ambiguity is heavy. For taxpayers, it means harassment, uncertainty, and mounting compliance costs. For the government, it means loss of revenue as cases drag on in courts, besides loss of credibility for the GST regime. For the judiciary, it means docket explosion — constitutional courts spending time deciding whether summons count as proceedings instead of grappling with weightier constitutional questions.

This is not just inefficiency; it is systemic failure. A reform designed to unify and simplify has become yet another labyrinth where only those with deep legal resources survive.

The Supreme Court’s Pragmatism

The Supreme Court, to its credit, has tried to tidy up the mess. In Armour Security, it drew sensible distinctions: show cause notices crystallize liability, intelligence-based enforcement is cross-empowered, duplication must stop. It also nudged the GST authorities to use IT systems for real-time coordination so taxpayers aren’t hounded by parallel proceedings.

But let’s be clear: this is judicial pragmatism, not legislative foresight. The Court can only interpret the law; it cannot rewrite it. The risk remains that another ambiguity, another amendment, will send taxpayers running back to the courts.

Govt Must Go Beyond Tinkering with GST Rates

If the government is serious (which it should be) about restoring trust in GST, it must go beyond tinkering with rates. Three reforms are urgent:

1. Drafting Clarity: Every amendment must come with watertight definitions. Terms like “proceedings” or “subject matter” should never be left to guesswork.
2. Legislative Consolidation: Instead of piecemeal notifications and circulars, GST law should be periodically consolidated into a clean, updated code.
3. Council Responsibility: The GST Council, as the forum of cooperative federalism, should vet not only rates but also drafting quality, to ensure State and Central authorities speak one language.

Without such steps, GST will continue to lurch from amendment to amendment, court case to court case, eroding both compliance and confidence.

A Relook key to Cure GST’s Bad Drafting

The Armour Security judgment may shield taxpayers from harassment today, but it cannot by itself cure GST’s chronic ailment of bad drafting. The larger lesson is that tax certainty cannot be built on judicial band-aids. Parliament must take responsibility for precision. Otherwise, the dream of one nation, one tax will keep collapsing into the reality of one nation, endless litigation.

The Supreme Court has done its part by drawing the line. Now it is for lawmakers to stop redrawing it every few months with ambiguous amendments. GST does not need more slabs or slogans. It needs clarity, stability, and above all, the political will to legislate with precision. Only then can the taxpayer — and the judiciary — breathe easy.

(This is an opinion piece, and views expressed are those of the author only)

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