In a key incident under the GST scheme, an application that sought to get an advance ruling was dismissed by AAR on the ground that the matter had previously been considered before in the preliminary scrutiny and assessment forum. It enhances a key procedural safeguard under GST law — a taxpayer who has pending or finalized matters under the Act cannot seek an advance ruling.
To the AAR, the applicant sought an explanation in respect of the applicability of GST exemption on particular transactions. But tax authorities had initiated scrutiny and assessment proceedings on the same matter. At the hearing it emerged that the matter had either been examined or was under consideration by the jurisdictional GST officer.
Legal Basis for Rejection
Relying on the CGST Act 2017 (s 98(2)), the AAR indicated that:
An application for the advance ruling will not be made of the applicant where the matter which has been posed is pending or resolved in any proceedings by the applicant under some of the provisions of the GST Act.
The court held the application to be not maintainable because a previous inquiry had dealt with the GST liability question.
Bar on Parallel Proceedings under Procedural Rules
The ruling stresses three crucial principles:
- No Parallel Remedies — taxpayers cannot go through scrutiny/assessment proceedings and proceed with ruling on the same issue concurrently.
- No Post-Adjudication Relief — advance ruling is not permitted to either reassess or to reverse judgements made by the tax authorities prior to its adjudication.
- The Scope of AAR is Limited — the AAR mechanism is intended to support prospective clarity, not to resolve disputes once adjudicated.
Judicial Precedents
In several states, AAR and Appellate AAR decisions ruled that advance rulings cannot be sustained when:
- The issue is a matter of investigation,
- A show cause notice has been served, or
- An assessment order has been granted.
This was in line with the general interpretational principle of the GST system.
Taxpayers Practical Considerations to Take Off
Businesses have to consider their procedural position before seeking an advance ruling. Key takeaways include:
- Find out the status of litigation before you approach AAR.
- Make sure there is no ongoing review, audit, or adjudication addressing the same question.
- Keep the understanding that advance ruling isn't a correction mechanism.
The Tamil Nadu Authority for Advance Ruling reiterates on the statutory limits of advance rulings under GST. It is a helpful reminder that the point of the AAR forum is to guarantee certainty before tax proceedings are to be conducted or concluded, not for the interruption of or the invalidation of tax proceedings pending or concluded. The matter is, for those doing business in Tamil Nadu, but even more importantly for others in India, a reminder of the importance of compliance process and timing in achieving legal certainty under GST.
