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 refund claims after favourable advance rulings ordinarily require the statutory refund route, not later return adjustments.
GST paid on past transactions is not automatically refundable or reversible solely because a later favourable advance ruling treats the transaction as exempt or non-taxable. Recovery ordinarily requires a refund claim under Section 54, subject to limitation and unjust-enrichment conditions. Historical tax payments should not ordinarily be adjusted by reducing liability in a later GSTR-3B, since this does not generally substitute for the refund mechanism. Expired limitation may require separate examination of Article 265 and retention of tax without authority of law.