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.

[Shilpi Jain]

Refund is eligible if the time limit u/s 54 of 2 years has not lapsed.

Ruling of AAR is binding meaning that for the transaction that is ongoing and which was existing in the past (without any change in facts/circumstances) the same conclusion as in the ruling applies.

AI Summary

GST refund for exempt transactions generally requires the statutory refund route, not adjustment through subsequent GSTR-3B filings.
GST paid on transactions subsequently found exempt or non-taxable under a favourable advance ruling may generally be recovered through a refund claim under Section 54, subject to the two-year limitation period and unjust-enrichment requirements. Historical GST should not ordinarily be adjusted by reducing liability in a later GSTR-3B, as this does not generally substitute for the statutory refund process. Where limitation has expired, constitutional or writ remedies may require fact- and jurisdiction-specific examination.