GST Advance Ruling Rejected Due to Pending Tax Proceedings
The Authority for Advance Ruling rejected an application because the business already had active tax scrutiny proceedings on the same issue.
- Ruling
- Advance Ruling No. 7/ARA/2026, Dated 22.01.2026
- Dated
- 22 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
- Murali Pharmacy asked about GST threshold exemptions for small businesses.
- The Authority for Advance Ruling rejected the request entirely.
- The law forbids rulings on issues already under active tax assessment.
- No decision was made on the actual GST exemption rules.
In short
Murali Pharmacy asked the Authority for Advance Ruling (AAR) if they qualified for a GST exemption for businesses with turnover under 40 lakhs. The AAR refused to answer because the pharmacy was already facing tax scrutiny and assessment for the same period. Under the law, the AAR cannot provide a ruling if the tax department is already investigating the specific question.
What has changed
How it worked before
Businesses often assumed they could seek a formal ruling to clarify their tax position even if the tax department had raised questions about their filings.
What has changed
The ruling confirms that if your tax officer has already started an assessment or sent a notice about a specific issue, you cannot bypass that process by asking the AAR for a different opinion. This means the AAR will reject your application immediately without looking at the merits of your tax question.
Who this affects
Any business owner currently facing a tax audit, scrutiny, or assessment notice from the GST department.
An example
Imagine a grocery store owner who receives a notice from their tax officer questioning their GST registration status. If the owner then applies for an advance ruling to ask if they should have been registered, the AAR will reject the application. The owner must instead respond to the tax officer's notice and follow the regular assessment path.
What you should do
If you are already under audit or scrutiny, you must resolve the issue through the standard assessment process rather than seeking an advance ruling. Remember that an advance ruling only binds the specific business that asked and its own tax officer; it is not a general law that applies to everyone.
If you do nothing
If you ignore active proceedings to seek an advance ruling, you will waste time and money on an application that will be rejected. You will still be required to face the original tax officer, and the delay may lead to additional interest or penalties on unpaid taxes. The tax officer is not required to wait for an AAR decision that is procedurally barred.
The terms explained
- Advance Ruling
- A formal decision provided by tax authorities to a business to clarify how GST laws apply to their specific transactions.
- Scrutiny
- A process where tax officials examine your filed returns to check for errors or discrepancies.
- Adjudication
- The formal process of deciding a tax dispute, usually resulting in an order that determines how much tax is owed.
The ruling in detail
Authority for Advance Ruling
M/s. MURALI PHARMACY
Advance Ruling No. 7/ARA/2026, Dated 22.01.2026 · Tamil Nadu
Questions before the authority
- Whether the applicant is liable to pay tax for turnover less than the threshold limit of Rs. 40 Lakhs as per the Notification No. 10/2019-CT dated 07-03-2019?
- Whether the provisions of exemption as per Notification No. 10/2019-CT dated 07-03-2019 is applicable only to new registrants or applicable to existing registrants under GST, before 01-04-2019?
Facts
The applicant is a proprietorship concern registered under GST, engaged in the retail sale of medicines and medical equipment. The applicant sought an advance ruling on whether they are liable to pay tax on turnover below the threshold of Rs. 40 Lakhs, relying on Notification No. 10/2019-CT. However, the tax authorities had already initiated scrutiny and assessment proceedings against the applicant for the period 2019-20 to 2021-22 prior to the filing of this application.
Ruling
| Question | What the authority ruled |
|---|---|
| Liability to pay tax for turnover below Rs. 40 Lakhs | Rejected Application rejected as the matter is already pending in proceedings |
| Applicability of exemption to existing registrants | Rejected Application rejected as the matter is already pending in proceedings |
The Authority for Advance Ruling rejected the application in its entirety. It held that the application is not admissible because the questions raised are already pending or decided in proceedings under the Act. Consequently, the merits of the questions regarding the threshold exemption were not addressed.
Reasoning
The Authority relied on the first proviso to Section 98(2) of the CGST Act, 2017, which mandates that the Authority shall not admit an application where the question raised is already pending or decided in any proceedings. The records confirmed that scrutiny and assessment proceedings, including the issuance of Form GST ASMT-10 and subsequent adjudication orders in Form GST DRC-07, were initiated against the applicant before the filing of the advance ruling application. Therefore, the Authority concluded that it lacked the jurisdiction to entertain the application on merits.
Provisions relied on
- Section 98(2) of the CGST Act, 2017
- Notification No. 10/2019-CT dated 07-03-2019
- Rule 107A of the CGST Rules
- Circular No. 25/25/2017-GST
For the practitioner
This ruling serves as a **procedural bar** for practitioners, emphasizing that an application for advance ruling will be rejected if the subject matter is already under scrutiny or assessment by tax authorities. It does not provide any substantive interpretation on the applicability of the Rs. 40 Lakhs threshold exemption for existing registrants. Practitioners should ensure that no active proceedings exist regarding the specific issue before filing for an advance ruling.
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/7-murali_pharmacy_aar_order_compressed.pdf
Legibility of the scan, as read: high.
Prepared 12-10-2026.
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