GST | Refund or Adjustment of Tax Paid Pursuant to Favourable Advance Ruling

[Abhijeet Mane]

If an assessee has paid GST on a transaction for past periods and subsequently obtains a favourable AAR/AAAR holding that the transaction is exempt/not taxable, whether the assessee need to mandatory refund of GST already paid for prior periods?

Or, whether the tax already paid be adjusted through GSTR-3B or is refund under Section 54 the only remedy?

[Sanjeev Agarwal]

A favourable AAR/AAAR does not, by itself, require the assessee to refund or reverse GST already paid for past periods. However, if the assessee seeks recovery of such GST on the basis that the transaction was exempt/non-taxable, the normal statutory remedy is a refund claim under Section 54, subject to limitation and unjust-enrichment requirements.

The assessee should not ordinarily adjust the historical GST merely by reducing its liability in a subsequent GSTR-3B. Such adjustment cannot be treated as a general substitute for the statutory refund mechanism, particularly in view of the Supreme Court's decision in Bharti Airtel on rectification of GSTR-3B.

Where the Section 54 limitation has expired, a separate examination is required as to whether the amount was collected/retained without authority of law and whether an Article 265/writ remedy is available. This is fact- and jurisdiction-sensitive.

AI Summary

GST paid on subsequently exempt transactions raises whether prior-period tax requires refund or may be adjusted through GSTR-3B.
GST paid on past transactions subsequently considered exempt or non-taxable under a favourable advance ruling raises whether the taxpayer must seek refund for prior periods or may adjust the amount through Form GSTR-3B. The issue concerns whether the refund mechanism under section 54 is the exclusive route for recovery of tax already paid.