GST Advance Ruling on Inverted Duty Structure Refunds Rejected
The Authority for Advance Ruling rejected a request for a refund opinion because it was filed by a consultant, not the supplier.
- Ruling
- Advance Ruling No. 5/ARA/2026, dated 12.01.2026
- Dated
- 12 Jan 2026
- 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
- Consultants cannot file for advance rulings on behalf of their clients.
- The Authority rejected the application because the applicant was not the supplier.
- Applications are inadmissible if the issue is already pending in other legal proceedings.
In short
A consultant asked the Authority for Advance Ruling (AAR) whether their clients could claim a GST refund for an inverted duty structure. The Authority refused to answer the question because the person asking was not the business actually making the supplies, and the matter was already being handled in other legal proceedings.
What has changed
How it worked before
Businesses often assumed that consultants could seek clarity on behalf of clients to resolve tax uncertainties.
What has changed
The Authority clarified that only the business undertaking the supply can apply for a ruling. Furthermore, if a tax issue is already being debated in other proceedings, the Authority will not provide a separate ruling on it.
Who this affects
Consultants, tax advisors, and business owners who are already involved in ongoing tax disputes or audits.
An example
Imagine a textile manufacturer, 'Cotton Co.', who wants to know if they can claim a refund for an inverted duty structure. If they hire a consultant to file the request, the Authority will reject it because the manufacturer must file it themselves. If 'Cotton Co.' already has an active audit or court case regarding this refund, the Authority will also reject the application because the matter is already pending.
What you should do
If you are a business owner, you must file for an advance ruling yourself rather than using a consultant. Remember that an advance ruling only applies to the specific business that asked for it and does not set a general law for everyone else.
If you do nothing
If you assume this ruling applies to you or try to use a consultant to bypass standard procedures, your application will be rejected. You may waste time and money on legal fees for a request that the tax authorities are legally barred from answering. Always ensure your application is filed by the correct entity and does not conflict with ongoing legal proceedings.
The terms explained
- Advance Ruling
- A formal decision from tax authorities on how GST laws apply to a specific business transaction.
- Inverted Duty Structure
- A situation where the tax rate on the raw materials you buy is higher than the tax rate on the finished product you sell.
- Input Tax Credit
- The tax a business pays on its purchases that it can use to reduce the tax it owes on its sales.
The ruling in detail
Authority for Advance Ruling
M/s. AFS Group
Advance Ruling No. 5/ARA/2026, dated 12.01.2026 · Tamil Nadu
Questions before the authority
- Whether the applicant is eligible to claim refund under Section 54(3)(ii) of the CGST Act, 2017 for the accumulated Input Tax Credit arising due to inverted Duty Structure in respect of manufacture and outward supply of 100% Cotton Yarn (HSN 5205), where input goods and input services attract higher rate of GST compared to output supplies?
Facts
The applicant is a consultant acting on behalf of clients who are manufacturers and suppliers of 100% Cotton Yarn. The applicant sought an advance ruling regarding the eligibility of these clients to claim a refund of accumulated Input Tax Credit under Section 54(3)(ii) of the CGST Act, 2017, due to an inverted duty structure. During the personal hearing, the applicant admitted that the issue of refund for their clients is already the subject of pending proceedings.
Ruling
| Question | What the authority ruled |
|---|---|
| Eligibility to claim refund under Section 54(3)(ii) of the CGST Act, 2017 | Application rejected The question did not relate to the applicant's own supply and the matter is already pending in other proceedings |
The Authority rejected the application for an advance ruling. It held that the question raised does not pertain to the supply of goods or services undertaken or proposed to be undertaken by the applicant themselves. Furthermore, the Authority noted that the matter is already subject to pending proceedings, rendering it inadmissible under the provisions of the Act.
Reasoning
The Authority relied on Section 95(a) of the CGST Act, 2017, which defines an advance ruling as a decision on matters specified in Section 97(2) in relation to the supply of goods or services being undertaken or proposed to be undertaken by the applicant. It found that the applicant, being a consultant, was not the supplier in the transaction. Additionally, the Authority invoked the proviso to Section 98(2), which mandates that the Authority shall not admit an application where the question raised is already pending or decided in any proceedings in the case of an applicant.
Provisions relied on
- Section 54(3)(ii) of the CGST Act, 2017
- Section 95(a) of the CGST Act, 2017
- Section 97(2) of the CGST Act, 2017
- Section 98(2) of the CGST Act, 2017
For the practitioner
This ruling serves as a **procedural reminder** that an advance ruling cannot be sought by a consultant on behalf of clients, nor can it be used to bypass or obtain a parallel decision on matters that are **already pending in other proceedings**. It reinforces the requirement that the applicant must be the party undertaking the supply in question. It does not provide any substantive guidance on the merits of inverted duty structure refunds.
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/5-afs_group_aar_order.pdf
Legibility of the scan, as read: high.
Prepared 12-10-2026.
About Patron Accounting LLP
Patron Accounting LLP is a CA and CS-led accounting and compliance firm that has been working with businesses across India since 2019. We handle the work that keeps a company correct with every department it answers to: day-to-day bookkeeping and accounting, GST registration and returns, income tax filing and assessments, TDS, payroll and PF/ESI, company and LLP incorporation, ROC and MCA compliance, statutory and internal audit, physical stock and inventory audits, trademark and other registrations, and the certificates and reports that banks, buyers and regulators ask for.
Our clients range from a first proprietorship registering for GST to established companies running operations across several states. Much of our work is exactly this: reading what a department has published and telling a business, in plain terms, whether it changes anything for them.
We operate from five offices and serve clients across the rest of India remotely:
- Pune (HQ): RTC Silver, B4-708, Sai Satyam Park, Wagholi, Pune, Maharashtra 412207
- Mumbai: 104, Rajshila Building, 597 J.S.S. Road, Marine Lines, Mumbai 400002
- Delhi: 3rd Floor, B-6/154-155, Sector 5, Rohini, Delhi 110085
- Gurugram: Pioneer Urban Square, B109, Golf Course Ext Road, Sector 62, Gurugram 122098
- Ahmedabad: Phoenix Tower, 1107, near Commerce Six Road, Drive In Road, Navrangpura, Ahmedabad, Gujarat 380009
If anything on this page affects you and you would like somebody to look at your own position, we are glad to help. Call +91 94594 56700, write to sales@patronaccounting.com, or visit patronaccounting.com. The first conversation costs nothing.