GST Advance Ruling: Why You Cannot Ask About Completed Transactions
The Tamil Nadu Authority for Advance Ruling rejected a request because the business had already finished the transaction before applying.
- Ruling
- Advance Ruling No. 119/AAR/2023 Dated: 29.11.2023
- Authority
- Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- Ionbond Coating asked if transferring leasehold rights counts as a GST supply.
- The company had already completed the transfer and received payment.
- The Authority rejected the application because it only rules on proposed transactions.
- Advance rulings are not for validating past tax decisions.
In short
The company asked the Tamil Nadu Authority for Advance Ruling (AAR) to decide if their land lease transfer was a taxable supply under the Goods and Services Tax (GST) law. The authority refused to answer because the deal was already finished before the application was filed.
What has changed
How it worked before
Businesses often assumed they could use the advance ruling process to confirm the tax treatment of transactions they had already executed to settle disputes or clarify their tax position.
What has changed
The authority clarified that under Section 95(a) of the CGST Act, they only have the power to rule on transactions that are currently being planned or are about to happen. This means you cannot use this process to get a 'second opinion' on a tax return you have already filed or a deal you have already closed.
Who this affects
Any business owner planning a complex transaction who wants to confirm the GST implications before signing contracts or moving money.
An example
Imagine a business owner, 'BuildRight Corp', plans to sell a factory building and is unsure if it attracts GST. They should file an application with the AAR before they sign the sale deed or accept any money. If they wait until after the sale is complete, the AAR will reject their application just as they did for Ionbond Coating.
What you should do
If you have a tax doubt, apply for a ruling before you start the transaction. Remember that an advance ruling only binds the specific business that asked and its local tax office; it does not automatically apply to your business or change the law for everyone else.
If you do nothing
If you assume a ruling for another company applies to you, you risk paying the wrong amount of tax. If a tax officer disagrees with your interpretation, you may face penalties and interest for underpayment. A ruling is a personal shield for the applicant, not a general rule for the industry.
The terms explained
- Advance Ruling
- A formal decision provided by tax authorities on the tax consequences of a proposed business transaction.
- Supply
- Any form of sale, transfer, or exchange made for a price that triggers the requirement to pay GST.
- Leasehold rights
- The legal right to use a property for a specific period, which can sometimes be transferred to another party.
The ruling in detail
Authority for Advance Ruling
Ionbond Coating Private Limited
Advance Ruling No. 119/AAR/2023 Dated: 29.11.2023 · Tamil Nadu
Questions before the authority
- Whether the subsequent transfer of State Industries Promotion Corporation of Tamilnadu Limited's (SIPCOT) allotted lease hold rights in the land from the Applicant to M/s.Kanta Flex (India) Private Limited would fall with the ambit of 'Supply' as defined under Section 7 of the Goods and Services Act, 2017?
- If yes, what will be the HSN/SAC code and GST Rate?
Facts
The applicant, a GST registrant, entered into a Memorandum of Understanding to transfer its leasehold rights in land, along with building and electric equipment, to M/s. Kanta Flex (India) Private Limited. The applicant sought an advance ruling on whether this transfer constitutes a supply under the CGST Act and, if so, the applicable HSN/SAC code and GST rate. The authority noted that the entire transaction, including the receipt of consideration, was completed prior to the filing of the application.
Ruling
| Question | What the authority ruled |
|---|---|
| Whether the transfer of leasehold rights falls within the ambit of 'Supply' | Not answered The authority refrained from ruling as the transaction was already completed. |
| Applicable HSN/SAC code and GST Rate | Not answered The authority refrained from ruling as the transaction was already completed. |
The authority refused to provide a ruling on the merits of the questions raised. It held that the applicant cannot seek an advance ruling on a transaction that has already been completed. Consequently, the application was rejected on procedural grounds.
Reasoning
The authority relied on Section 95(a) of the CGST Act, 2017, which defines 'advance ruling' as a decision on matters being undertaken or proposed to be undertaken. Upon reviewing the facts, the authority determined that the entire transaction, including the receipt of consideration, was concluded by 07.05.2022, whereas the application was filed on 29.12.2022. Therefore, the authority concluded that it lacked jurisdiction to provide a ruling on a **completed transaction**.
Provisions relied on
- Section 95(a) of the CGST Act, 2017
- Section 97(2) of the CGST Act, 2017
For the practitioner
This ruling serves as a reminder that the Advance Ruling mechanism is strictly for **prospective or ongoing transactions**. It does not provide a forum for taxpayers to seek validation for transactions that have already been executed. Practitioners should ensure that applications are filed before the transaction is completed to avoid rejection on procedural grounds.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/AAR/119_ionbond.pdf
Legibility of the scan, as read: high.
Prepared 13-10-2026.
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