In conversation with Karan Talwar, founder of Karan Talwar & Associates. He is a gold medallist from NALSAR who has worked in leading law firms of the country in Delhi and Hyderabad before setting up his firm in Hyderabad. He specializes in tax and corporate laws and provides advisory and litigation services. In the past, he has acted for eminent companies and not-for-profits in India. He has appeared before the Hon’ble Supreme Court of India, High Courts at Hyderabad, Delhi, and others, tax tribunals, and other lower courts. In the past, he has delivered lectures at various conferences and seminars organised by Assocham, FTAPCII, the Institute of Chartered Accountants of India and the Institute of Costs Accountants of India. He has written many articles in different law journals and on several legal portals.
The interview begins by seeking insights from his journey at NALSAR and his experience in the early days of his profession. We then hear from him about the GST law and its impacts on the Indian indirect taxation regime. More specifically, he speaks about the needs of the legal industry and the potential it holds for the future.
Q1. What is your fondest memory at NALSAR University of Law?
There are many, but I think the best was just to hang out with friends, chill and relax. It is a luxury which we do not have in today’s world where you are busy with the profession, and you are busy with your family. I used to love playing table tennis, late into the night in the hostel. That was one of the sole forms of recreation that we had in the first and second years. Today, of course, we have a lot more infrastructure. I would say just watching movies with friends. Sometimes we were exposed to good cinema in one of our friends’ hostel rooms where we all would watch a good movie together. And of course, there were the great debates like I am sure all of you also have, where you are all passionately trying to argue a point- be it in philosophy or politics or whatever. I do not know how right we were. Nevertheless, it was something that I also really, really enjoyed. Then of course the usual, we would go to Dhaba nearby. Pretty much what all of you would also have done is what we had also done. Just looking back is nice, the fests were a lot of fun, the amount of diversity that we would see in terms of people coming up with performances or food, for me it was an eye-opener, because at that time itself we had students from about 25 states, so yeah, a lot of happy memories, I am grateful for.
You know, we had, of course, the Carpe Diem. Then I recall people celebrating the festivals like Onam or Lohri and there were things around that.
Q2. Apart from insight into law and the profession, we want to learn about your thought process back in time when you wanted to enter litigation. What did you see your career to look like and about the firms you joined? Could you please inform us of your journey?
Let me start by saying that when I was just about to graduate from law school, one of the messages that I kept receiving from a lot of judges and senior advocates who used to come and visit us was that focus on learning when you first get out of law school, at least for the first 4-5 years. And that is the message that stayed with me. So, I decided that I would have an open mind and I would try and experiment within the law as much as I could and get as much diverse exposure.
With such a mindset at the time of graduation, when I stepped out of NALSAR, I started a life in the city civil court of Hyderabad. A lot of people might not know that. I spent a few months learning the procedure there. On the weekend, I used to go and work in a chartered accountancy firm where I would assist them by looking up their income tax matters which were pending before the quasi-judicial authorities. And so, I had a lot of learning there as well.
But after a few months, I sort of got impatient and I said okay, I may be learning a lot of procedure here but I am missing out on substantive law learning because it was procedural law which was in abundance in these spaces. Maybe in retrospect, I should have perhaps continued a little more but I did not.
I then moved on to Delhi and joined Lakshmikumaran and Sridharan after a few months. Then I also started in the indirect tax team which had certain specializations within its scope. They had separate teams for central excise, customs and service tax as it was evolving at that time. In addition, of course, there were IP practices as well. I was there in the central excise team for about a year and got great exposure. I was allowed to go to the Supreme Court, to the High Court and was given small matters to argue at a very young age, they were very encouraging.
But then again, I felt after a year that I would like to diversify and not miss out on other things. Because the advantage of being young and being able to do other things may not be there as you grow older, I joined another firm. It was a mid-sized firm, named Premnath Rai Associates. Mr. Premnath Rai was a corporate lawyer who used to be the “number-two” lawyer in a firm named JSA. He had started his own firm, it was a boutique firm and I was with them for a couple of years. I got diverse exposure in a lot of corporate and commercial laws there. I worked on transactions- lot of mid-sized M&A transactions, some of them big also. I worked on a project finance deal and was involved in a lot of commercial litigation, shareholder disputes, winding up petitions, and quash petitions under Section 482 of the Criminal Procedure Code to name a few. I remember even working on Insurance law. That is where I got quite a bit of diverse experience. I think the experience was invaluable for me when I also set up my own office.
After that, having worked in Delhi for a few years, I came back to Hyderabad, for personal reasons. And then destiny and a dear friend got me back into Lakshmikumaran and Sridharan, when I joined their Hyderabad office. The funny thing is that when I joined them back in 2010, they asked me to set up the corporate practice. They were very well known for taxes, international trade and IP. I was only five years in the profession and I took that as a very, very interesting opportunity. Of course, to be very honest, I was also extremely scared. From being in the profession only for five years to lead a corporate practice in a growing city is very, very difficult. But I did so and slowly we built a team. We then finally had a team of about five people before I left them, dedicated to doing corporate and commercial law work. I also got to do a lot of income tax work and a lot of IP litigation during this period. So, I was grateful for that kind of opportunity.
In about three years or so midway into being with them in Hyderabad, the tax partner wanted to move back to Chennai, where he was originally from. And that is when I started spearheading both teams.
So, that’s when I started looking after their entire practice in Hyderabad till I left them in 2017 and then started my practice. So, it is a journey somewhat guided by, of course, my aspiration and also my circumstances, because you cannot really script all of this. You know, students believe that they will be sort of able to script their entire career. I think, you know, they will find many, many doors that close for them and other doors that open for them. This has been the journey. And now of course, I have my own practice, have been running it for about 6 years, where again we do a lot of tax, corporate and commercial work.
Q3. Many students wish to find a specialisation in their entire career right from law school. Some would go for one thing solely and would wish to specialise. What are your opinions on this approach? How do you see this generalization versus specialization debate, at least in tax?
To answer this question, I think it depends on your personality type. If you are someone who is more inclined to a specialized role, I think that is also fine. You can start by specializing in whichever area you really want to. I will only have a caveat that maybe at least if you can, spend one or two years doing some general law work, that would be good. But if not also, given the architecture of law firms today, law practices today, where there is a great emphasis on specialization, that does happen. Right from day one, you are in a super specialized area- you spoke of taxes and IP, even within direct taxes, some people specialise in International Tax, in IP some people are there who only specialise in patent, or Trademark or Copyright—we do have this kind of divide, but there are also lawyers who have been able to juggle doing different practise area.
What does tend to happen is that ultimately, you’ll tend to sort of specialize in one or two areas. It is sort of difficult in today’s world to be a very generalist lawyer doing everything. We have a few senior counsels, of course, who sort of are engaged and are able to do a wide variety of matters. But then that is sometimes on a small or a short point of law that they will come and argue based on a briefing by briefing counsels. And there are very few of them, I would say.
The era of specialization is coming about. I would still say that you may not be confined to just one super-specialized area, but you can sort of juggle between two and three. I think it is possible, even in today’s world, no matter what the competition may be.
Q4. Are there any other factors significant to choosing specialisation?
See, one is also a product of their environment. If you are in a city today that has a very sophisticated legal market like, say, Delhi or Bombay, then specializations are far more. And it is extremely competitive in those kind of jurisdictions. But in places maybe like Hyderabad or in the other growing cities of India, I still think that you can probably juggle a lot more.
So, when it comes to direct taxes and indirect taxes, the reason for not being able to cross over is similar. Indirect taxes in these jurisdictions especially is very, very competitive. Firms that hire lawyers also like to build efficient teams and there is nothing wrong with that. They expect you to do only that particular area which you have been hired for.
Some people have been able to manage. But I can tell you it is very tough. It is not easy at all. It involves a lot of hard work. So, you will sacrifice a lot of personal time if you are trying to be good at this.
Q5. What do you think are some of the skillsets, knowledge or anything of that sort that kind of stays constant throughout any area of law? In your view, how would you see a “common set of skills” that apply to all areas? Are there any such skills?
Look, ultimately, you have to be a good lawyer. Unless the fundamentals are strong, you will never be able to become a good tax lawyer or any kind of specialist. So, all the things like drafting, cross-examination, statutory interpretation, basic concepts of law being clear, you updating yourself all the time, these are basic. Unless you have them, anyways you can never be a good lawyer. Now, I do not think you can compartmentalize them and say first get good at drafting, then get good at the law. All of this has to sort of travel together, especially in the first few years.
My takeaway is that the most time that you have as a lawyer to learn your craft probably is before you settle down and get married. Then you have the most time, and it is at that time, the first five or six years of your career, that you focus on each of these things. Each of these is non-negotiable. Be it the drafting, research, reading, or exposure you get, you have to work under a good mentor. I think blessed are those who get good mentors. Many lawyers sometimes do not get them. And your mentor is the one who is going to guide you at each step of the way.
It will be difficult for a young lawyer to envision how he is going to get good at each of these things. You do not learn all of that in law school. A good guide will tell you that these are the steps to take. So, I would say that identifying good mentors when you start your career is most, most important.
Q6. How do you pick the right mentor? Is it luck driven that you happen to come across a really good boss? What can you do? How do you identify who is a good mentor for you in the profession?
When you join a big law firm, it may be difficult to choose your mentor, because they will allocate you to a particular partner. You may not have much of a choice. But when it comes to smaller practices, boutique practices or individual lawyers, then of course you can always hear about those lawyers, find out about those lawyers and then apply to them and try and work on the job. It is also a combination of luck, but I do not think it is only luck. You can try and do internships with people you feel are good and can explore.
If you are sincere about it and you are good at the work that you do, then even mentors look for good people. A good mentor also enjoys the process of mentoring. There is a lot of learning that they also get when they mentor good youngsters. When I have mentored youngsters, I have found that a lot of good points come from them, which I would never have thought of. So, it is a sort of search where you have to find the right guru and be in sync with them and you can find them. Today through live streaming, you can see how they argue in court. You must realise that all mentors are humans, they will have their strength and weaknesses, you will have to live with that. You will not find a perfect mentor but you can find a good mentor.
Q7. We had some questions about GST in specific. When GST came, there was a huge amount of litigation because of the transitional provisions and it is a complete overhaul of the indirect tax regime. What are some of the similarities and differences on a structural level in indirect type litigation before GST and after GST? Are there any similarities or differences between the two?
Well, fundamentally, tax disputes will remain the same, but what we have found is that earlier, indirect taxes were spread across a variety of different tax laws. So, the taxable events were very, very different in the pre-GST regime. You had excise on manufacture, you had service tax on services, you had VAT on the sale of goods, you had entry taxes, you had luxury taxes, and so on. So, it is a wide variety of taxable events. Some of that litigation still, of course, continues today because it has to still be resolved by the higher Courts.
Now, with the onset of GST, I think the first radical change that we have seen is this 101st constitutional amendment. We are at the cusp of a redistribution of legislative powers that have come in. And this redistribution of legislative powers has already led to a lot of litigation as to what the scope of the powers are of the states and the centre. You have already seen a celebrated decision of the Union of India versus Mohit Mineral, where they looked at whether GST council recommendations are binding or not. And there are a lot of disputes as to whether the states could legislate, for example, after the 101st amendment came, but for the period before the onset of GST. So, all of that is also now pending in the Supreme Court. A couple of High Courts have already passed decisions or judgments on that.
The other change that I noticed is that today you have the minutes of the meetings of the GST council. With the onset of the GST council and this concept of pooled sovereignty, we are seeing a lot of discussions between the states before any new law is brought in today. So, that helps us give a lot of insight into what the background for these laws are, especially when we are looking to either interpret the laws or challenge them as it stands today. So, that itself is also very different from what we used to see in the pre-GST regime- we would be searching for what are the real reasons behind the passing of a new law, the statement of object and reasons would be very, very short. We did not get much of an idea. Now, it is fleshed out in the GST council. So, these are some of the kinds of changes that have come about.
The other thing is, GST is a new law. It has got remnants of the erstwhile indirect tax laws which are also there. We also see things borrowed from other countries. Since it is sort of a novel law in that sense, there is a tremendous amount of interpretation that is going on as to what is the true meaning of some of these provisions or the exemptions. There is also a plethora of constitutional challenges to so many of the provisions- We have seen it on the input tax credit provisions, we are seeing it in the context of valuation, we are seeing it in the context of arrest and even detention provisions have been constitutionally challenged! All of that is now going to come about over the next few years.
Given the new law, I think these are some of the very important changes that are going to come about. And we might also see disputes between states themselves as to who has the jurisdiction to tax particular transactions. That is also going to be something new when it comes to place of supply provisions, for example.
Q8. You mentioned that GST has remnants of the past, and we have borrowed from the experiences of other countries as well. For GST, when we start looking at other countries’ indirect taxation, they seem very different. Have you ever come across comparative research in indirect taxation? How do you approach trying to understand some other jurisdictions’ indirect taxation? What are some of the basic principles that one must learn before understanding how other countries approach indirect taxation?
I do not know if your experience has been that a lot of GST laws are very different in other countries, but I think the basic concept of supply is at least largely similar in the UK, Australia, and New Zealand. When we look at the concept of supply and its taxability, I think the jurisprudence of those countries is quite relevant.
When it comes to input tax credit, I think we have more of a regime that is borrowed from the past, customised. It is a mixture of what we saw in the CENVAT credit regime and VAT regimes. So, for that, I would rather look to the Indian jurisprudence in the past. But I may not look so much at what the law is over there in the other countries.
Things like valuation also are a bit of a mix-and-match. It is a combination of what we saw to some extent in central excise and somewhat it is been sort of modified over here.
But some complications arise, for example, in barters, where you have two supplies being made and how you would value them. Then there are some general concepts which I think you can look at in the foreign examples. Australia, for example, is a very good jurisdiction to look at because you see a lot of their tax rulings given out in advance. These comprehensive circulars explain the legal situation. Even UK to some extent.
To sum up, I would say it is a bit of a mix-and-match when you look at the jurisprudence. You may not find everything there and thankfully so, we do not need to borrow everything from there. But certainly, you will find rich jurisprudence and very relevant jurisprudence when it comes to taxability and the concept of supplies. So, that is what I would expect.
Q9. When it comes to indirect tax practice, right now, we still don’t have a GST tribunal set up. So, in case a tribunal is set up, how do you see it? Would it have any impact on the profession, on the amount of litigation that takes place? And for somebody who wants to enter indirect tax practice, can you provide a sort of outlook of what the next five to ten years in this area would look like?
The tribunal is something that has been long awaited. In the absence of the tribunal, whenever we have had the appellate authorities pass orders, we have been all going directly to the High Court. So, a lot of those matters are pending there. And there has also been a relaxation of limitation for filing appeals because the tribunal is not in existence. Some people have kept the matters pending and have not sort of travelled to the tribunal as of yet.
But I do feel that once the tribunal is formed, there is going to be a lot of litigation that is going to come about because of all these matters which are probably today in the High Court. Once the tribunal is formed, we are going to see a lot of these matters come back from the High Court, and also a lot of new matters.
In GST, if you ask me, a lot of the assessments for even 2017-18 have not been completed. Especially where, you know, the extended period of limitation as we call it may be involved or where there are allegations of suppression or fraud. So, there still is time and those orders have yet to be passed. What we are seeing today are a few orders on refund. We see a lot of fake invoice kind of cases. Few cases of assessments have been done. But still, it has not begun, in my view, in a big way. Once the tribunal is formed and these assessments kick-off, we are going to see a lot of litigation.
And if you look at the way the GST council has also been working in terms of amending the law, some of the clarifications have come which are retrospective in nature and all of those have been coming even till today. So, all that churning has to happen ultimately in a court of law. And very frankly, it has to happen in the tribunal because the tribunal truly is the last fact-finding body. The High Courts and the Supreme Courts may at best deal with writ petitions for natural justice violations or where there is an order passed without jurisdiction or constitutional challenges. But all of this has to be fleshed out only at the tribunal.
Q10. Amongst the High Court, the tribunal and the authority for advance rulings, how does appearing before these three courts differ fundamentally? What are the kind of approaches you take for each of the authorities?
You see, the authority for advance rulings or the appellate authority for advance rulings for that matter, is like quasi-judicial authority. You do not have a courtroom ambience or something like that. But you have officers who are of course well trained in the law.
It is more like you can very neatly explain the position of law. We have found from experience that a lot of the orders that have come from there have been negative. A few have been positive, but mostly it has been negative. So, I would say that of course, it is not like a court of law at first.
The tribunal is going to comprise judicial members and state members. A tribunal is more like a courtroom environment I would say, where there is a lot of argument by the assessees, representatives and the departmental representatives. And generally, the tribunal members would also be well-versed in the law. But we find from experience that they would be more judicious and more neutral. And as it is for young lawyers, I would say it is also a great learning ground because that is where you see all the points being fleshed out and get opportunities to argue.
High Courts of course typically will deal only with substantial questions of law. We are not going to re-hear questions of facts. And that is where now the legal point would be crystallized. And the emphasis shall be on the correct legal principle, correct jurisprudence would be a lot more in the High Courts. You will see a lot more advocacy happening and a lot more fleshing out of the point because some High Court judges would be well-versed in tax and some would not be that well-versed in tax.
There is a lot of scope certainly for the next few years once the assessments start. There is a lot of litigation you will find. Maybe I cannot predict with exactitude but at least for the next 10-20 years, I think there will be a lot of litigation because all of this litigation has to travel up- right from quasi-judicial authority to the tribunal and then to the High Court and then ultimately to the Supreme Court.
Q 11. Many students wish to specialise in tax laws right from the get-go of their time at NALSAR. If you had to go back in time if there is something that you wish to spend more time on at NALSAR. What would that be? Whether you would develop any skill at that time or anything of that sort. What do you think would be something you would do differently if you were at NALSAR?
That is a good question. I would say, one thing I realized is that people who want to specialize in taxation try and focus a lot more on reading up. Tax laws have an interplay with a wide variety of things. If you are working on an issue of taxation of HUF, you need to know about your Hindu law which you would have learnt in your family law course.
If you are looking at the Benami prohibition act for example, you need to be very grounded in your principles of trust law. Because those come into play. Even when you are looking at commercial transactions, contract law is very important. Company law is also extremely important for a tax lawyer.
Somebody asked me the difference between a bond and a debenture. And when I look at the definition of debentures, company law says debenture includes bonds. I look at Black’s law dictionary, bonds are like debentures. And these are all circular reasoning. What truly is the difference? So I would like to emphasize that knowing the concept and basics in each of the general areas of law is extremely important for a tax lawyer.
In the market, in the profession, you have a lot of tax lawyers, you also have a lot of chartered accountants. You also have a lot of costs and management accountants and all of them are in this field of tax who are practicing. The chartered accountants and the CMAs bring with them a lot of accounting knowledge. Tax lawyers are supposed to bring their knowledge of legal principles and jurisprudence to the field. That is the value, because both of these professionals or three of these professionals will all know the basics of tax law.
So, tax lawyers need to be very, very strong on things like these. And therefore, if you want to be a very, very good tax lawyer, I would say in addition to sort of reading up more on tax laws on the side because it is an area of interest, do not lose sight of basic principles and keep focusing on them as well. You will find that to be very important (emphasis laid).
The other thing is I did not do any diploma in tax or something like that. Perhaps if there was a good course that I could have done on the side, I think that would also have been very, very useful. But then, I mean, there is only so much you can do when you are in college. You are anyways going to keep working throughout your life.
So, college is also somewhere where you are grooming yourself as a person. I think even if I did not do it, it may not be so bad. But yeah, if I had the spare time, I think that would also have been interesting, especially in something like maybe international tax or something like that.
