Can a Recipient of Services File an Advance Ruling under GST? Verbatim Law, Case Laws & Legal Arguments

In the contemporary Goods and Services Tax (GST) architecture, the commercial recipient occupies a precarious legal position. With the Supreme Court definitively affirming the strict constitutional validity of Section 16(2)(c) of the CGST Act and the aggressive operationalization of the Invoice Management System (IMS), the recipient bears almost absolute financial accountability for the tax positions adopted by its suppliers. If a vendor erroneously levies 18% GST on an exempt inward service, the recipient faces working capital blockage and potential credit denial. If a vendor fails to charge GST on a transaction that the audit department subsequently classifies under the Reverse Charge Mechanism (RCM), the recipient is saddled with retrospective tax demands, mandatory 18% interest under Section 50, and penalty proceedings.

To eliminate this prospective ambiguity before committing to capital-intensive contracts—such as multi-decade industrial land leases, turnkey engineering projects, or logistics networks—prudent corporate recipients naturally turn to Chapter XVII of the CGST Act to seek an Advance Ruling.

However, upon approaching the Authority for Advance Ruling (AAR), taxpayers across India have encountered an entrenched administrative roadblock. In jurisdiction after jurisdiction, state AAR benches have summarily dismissed recipient applications at the threshold under Section 98(2), holding that an advance ruling is a statutory privilege reserved exclusively for the supplier.

This article examines the statutory conflict between Section 95(a) and Section 95(c), weaves together the competing arguments of the Revenue and taxpayers, and traces how landmark Division Bench decisions from the Rajasthan High Court (Power Grid Corporation) and the Calcutta High Court (Anmol Industries) dismantled the administrative threshold bar to establish that a recipient possesses full locus standi to seek an advance ruling.

1. The Statutory Framework: Section 95, Section 97, and Section 98(2)

The mechanism for obtaining certainty before undertaking a transaction is codified in Chapter XVII (Sections 95 to 106) of the CGST Act, 2017. To understand the genesis of the dispute, one must examine the governing statutory text verbatim.

Statutory Provisions (Verbatim)

"Section 95. Definitions.— In this Chapter, unless the context otherwise requires,—
(a) 'advance ruling' means a decision provided by the Authority or the Appellate Authority or the National Appellate Authority to an applicant on matters or on questions specified in sub-section (2) of section 97 or sub-section (1) of section 100 or of section 101C, in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant;
...
(c) 'applicant' means any person registered or desirous of obtaining registration under this Act;"

"Section 97. Application for advance ruling.—
(1) An applicant desirous of obtaining an advance ruling under this Chapter may make an application in such form and manner and accompanied by such fee as may be prescribed, stating the question on which the advance ruling is sought.
(2) The question on which the advance ruling is sought under this Act, shall be in respect of,—
(a) classification of any goods or services or both;
(b) applicability of a notification issued under the provisions of this Act;
(c) determination of time and value of supply of goods or services or both;
(d) admissibility of input tax credit of tax paid or deemed to have been paid;
(e) determination of the liability to pay tax on any goods or services or both;
(f) whether applicant is required to be registered;
(g) whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term."

"Section 98. Procedure on receipt of application.—
(1) On receipt of an application, the Authority shall cause a copy thereof to be forwarded to the concerned officer and, if necessary, call upon him to furnish the relevant records...
(2) The Authority may, after examining the application and the records called for and after hearing the applicant or his authorised representative and the concerned officer or his authorised representative, by order, either admit or reject the application:
Provided that the Authority shall not admit the application where the question raised in the application is already pending or decided in any proceedings in the case of an applicant under any of the provisions of this Act:
Provided further that no application shall be rejected under this sub-section unless an opportunity of being heard has been given to the applicant..."

The Section 98(2) Threshold Gatekeeping

Under Section 98(2), the AAR is vested with gatekeeping jurisdiction: it must either admit or reject the application at the threshold before proceeding to adjudicate the merits under Section 98(4).

The proviso to Section 98(2) explicitly enumerates the statutory grounds for threshold rejection: namely, where the question is already pending or decided in any proceedings in the case of the applicant. Conspicuously, lack of status as a "supplier" is not an express ground for rejection under Section 98(2).

Nevertheless, revenue officers appearing before the AAR routinely raised preliminary objections, arguing that Section 95(a) sets a condition precedent on subject-matter jurisdiction: an application can only relate to a supply "being undertaken or proposed to be undertaken by the applicant".

2. The Competing Legal Arguments: Literalism vs. Harmonious Construction

The administrative rejection of recipient applications brought two fundamental doctrines of statutory interpretation into direct collision.

The Revenue's Argument: Verba Legis and the "Outward Supply" Doctrine

The Department's standing objection before AAR benches rests upon the literal interpretation of the operative verb in Section 95(a):

1. Active Connotation of "Undertaken": The Revenue argues that the word "undertaken" denotes an active performance—the actual generation, manufacture, provision, or execution of the supply. In any commercial inward supply, the activity is undertaken solely by the vendor. The recipient is a passive beneficiary who merely purchases or consumes the finished supply.
2. Prevention of Third-Party Auditing: The Revenue contends that the purpose of Chapter XVII is to give certainty to a taxable person regarding its own business outputs. Allowing a recipient to seek rulings on inward supplies would permit commercial buyers to question, challenge, or audit the tax classification of third-party vendors without their participation.
3. Strict Adherence to Plain Meaning: Citing classic tax jurisprudence that tax statutes must be construed strictly according to their plain words, the Revenue insisted that an advance ruling cannot be expanded to inward supplies.

AAR benches readily embraced the Revenue's literalist argument. For example:

• The Maharashtra AAR in In re Romell Real Estate Private Limited (2022) summarily rejected an application filed by a recipient of works contract services:

  "The applicant is a recipient of works contract services and not a supplier. As per Section 95(a), an advance ruling can be sought only in relation to a supply being undertaken or proposed to be undertaken by the applicant. Since the applicant is not undertaking the supply, the application is rejected as non-maintainable."

• The Uttar Pradesh AAR in In re Uttar Pradesh Metro Rail Corporation Ltd. (2023) and the Haryana AAR in In re Bio-Rad Laboratories arrived at identical conclusions, creating a nationwide administrative consensus barring recipients at the threshold.

The Taxpayer's Argument: Legislative Intent and Definition of "Applicant"

Taxpayers confronted this literalist barrier by pointing out the internal contradictions of the Revenue's position:

1. The Parliament Chose "Any Person", Not "Supplier": Section 95(c) defines an applicant as "any person registered or desirous of obtaining registration under this Act". The draftspersons of the CGST Act were acutely aware of the term "supplier", which is defined with surgical precision in Section 2(105). Where the Parliament intended to restrict rights or duties to suppliers (such as Section 31 regarding tax invoices or Section 37 regarding outward supplies), it deliberately employed the word "supplier". In Section 95(c), Parliament chose the broadest conceivable phrase—"any person registered". Reading "supplier" into Section 95(c) amounts to impermissible legislative drafting under the guise of interpretation.
2. Economic Incidence and Civil Consequences: GST is an indirect tax designed to be borne by the recipient. With the enactment of Section 16(2)(c) and stringent input tax credit reconciliation, an incorrect tax classification directly penalizes the recipient. Denying the recipient access to advance certainty while holding them strictly liable for civil penalties violates the basic tenets of administrative fairness.

The Statutory Paradox: The Rule of Harmonious Construction

The taxpayer's most formidable legal weapon is the canon of harmonious construction—ut res magis valeat quam pereat (a statute must be read to make it effective rather than futile).

The Supreme Court of India in CIT v. Hindustan Bulk Carriers (2003) 3 SCC 57 held:

"A statute must be read as a whole and one provision of the Act should be construed with reference to other provisions in the same Act so as to make a consistent enactment of the whole statute... A construction which would reduce any clause, sentence, or word to a dead letter must be rejected."

When this principle is applied to Chapter XVII, the Revenue's literal reading collapses:

┌────────────────────────────────────────────────────────────────────────┐
│                   THE SECTION 97(2)(d) STATUTORY PARADOX               │
├────────────────────────────────────────────────────────────────────────┤
│  Section 97(2)(d) explicitly permits an advance ruling on:             │
│  "admissibility of input tax credit of tax paid or deemed to be paid"  │
│                                                                        │
│  ➜ Suppliers DO NOT claim ITC on their outward supplies.               │
│  ➜ Input Tax Credit is claimed SOLELY by recipients on inward supplies.│
│                                                                        │
│  If Section 95(a) is restricted only to outward suppliers:             │
│  ✘ No supplier could ever invoke Section 97(2)(d).                     │
│  ✘ Section 97(2)(d) is rendered entirely redundant and a dead letter.  │
│                                                                        │
│  Conclusion: To give operational life to Section 97(2)(d), the phrase  │
│  "supply... undertaken" in Section 95(a) must encompass both inward    │
│  and outward transactions in the commercial supply chain.              │
└────────────────────────────────────────────────────────────────────────┘

As recognized in our analysis of conditions to claim ITC under GST, the entitlement to credit is the exclusive domain of the inward recipient. Restricting advance rulings to outward suppliers makes Section 97(2)(d) impossible to operationalize.

3. Reverse Charge Mechanism (RCM): The Deeming Fiction in Power Grid Corporation

The first decisive judicial breakthrough occurred before the Rajasthan High Court in transactions governed by the Reverse Charge Mechanism (RCM).

Statutory Context: Section 9(3) and the Legal Fiction

Under Section 9(3) of the CGST Act, the Government is empowered to shift the liability to pay tax from the supplier to the recipient:

"Section 9(3): The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he were the person liable for paying the tax in relation to the supply of such goods or services or both."

The statutory mandate is unequivocal: all the provisions of this Act shall apply to such recipient as if he were the person liable for paying the tax.

The Factual Matrix in Power Grid Corporation

In M/s. Power Grid Corporation of India Ltd. v. State of Rajasthan & Ors. ([2024:RJ-JP:29877-DB], D.B. Civil Writ Petition No. 11370 of 2021, decided on 18.07.2024), Power Grid Corporation awarded large-scale turnkey engineering, procurement, and construction (EPC) contracts for setting up electricity transmission systems across Rajasthan. The execution of these contracts required the extensive transportation of heavy electrical equipment by road through various transport contractors.

Power Grid filed Form GST ARA-01 before the Rajasthan AAR seeking a ruling on whether the transportation services rendered by its contractors were exempt from GST under Serial No. 18 of Notification No. 12/2017-Central Tax (Rate) (which exempts services by way of transportation of goods by road, other than by a Goods Transport Agency or courier agency).

The commercial stakes were substantial:

• If the service was exempt, no tax was payable.
• If the service was taxable as GTA services under Notification No. 13/2017-Central Tax (Rate), Power Grid, as a registered corporate entity receiving the service, was statutorily obligated to discharge 5% GST under RCM.
• If Power Grid failed to pay under RCM, it faced retrospective tax recovery, mandatory 18% interest under Section 50, and penalties.

Despite Power Grid bearing the sole tax liability to the Government treasury, the Rajasthan AAR rejected the application at the threshold under Section 98(2), ruling that Power Grid was merely a recipient and that only the transport contractor could file an application.

The Doctrine of Legal Fiction: Lord Asquith's Principle

Before the Division Bench of the Rajasthan High Court, Power Grid's counsel invoked the celebrated doctrine of legal fiction articulated by Lord Asquith in East End Dwellings Co. Ltd. v. Finsbury Borough Council (1952 AC 109), which was adopted as binding law in India by the Supreme Court in State of Bombay v. Pandurang Vinayak (AIR 1953 SC 244):

"If you are bidden to treat an imaginary state of affairs as real, you must also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it... The statute says that you must imagine a certain state of affairs; it does not say that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs."

Power Grid argued that Section 9(3) commands the tax authorities to treat the recipient as if he were the person liable for paying the tax. This deeming fiction cannot be halted at the door of Chapter XVII to deny the recipient the right to determine its liability under Section 97(2)(e).

Operative Ratio of the Rajasthan High Court (Verbatim Excerpts)

A Division Bench comprising Hon'ble Mr. Justice Avneesh Jhingan and Hon'ble Mr. Justice Ashutosh Kumar set aside the AAR's rejection, holding:

"Section 95 of the Act, which defines 'advance ruling', opens with the words 'in this Chapter, unless the context otherwise requires'. The expression 'unless the context otherwise requires' gives elasticity to the interpretation of the provisions of Chapter XVII."

"Under sub-section (3) of Section 9 of the CGST Act, the Government is empowered to specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both. The statute creates a deeming fiction whereby all the provisions of the Act apply to such recipient as if he were the person liable for paying the tax in relation to the supply of such goods or services."

"Once the statute creates a deeming fiction treating the recipient liable to pay tax under reverse charge as the person liable to pay tax, such legal fiction must be carried to its logical conclusion and given full play. It cannot be truncated at the threshold of Chapter XVII so as to deny such person the right to seek an advance ruling."

"The definition of 'applicant' under Section 95(c) means any person registered or desirous of obtaining registration under the Act. It is not confined to a supplier. Consequently, the petitioner, being a registered person burdened with the liability to pay tax on the transaction under reverse charge, is fully entitled to maintain the application for advance ruling. The impugned order rejecting the application as not maintainable is set aside, and the matter is remitted back to the Authority for Advance Ruling to decide on merits."

Finality: The Supreme Court's Affirmation

The State of Rajasthan preferred a Special Leave to Appeal before the Supreme Court of India. On July 18, 2025, a Supreme Court Bench comprising Hon'ble Justice Pamidighantam Sri Narasimha and Hon'ble Justice Atul S. Chandurkar dismissed the SLP:

"We are not inclined to interfere with the impugned judgment and order passed by the High Court. The Special Leave Petition is, accordingly, dismissed. However, the question of law is kept open."

By dismissing the SLP, the Supreme Court ensured that the High Court's ruling remanding the application for adjudication on merits attained complete operational finality.

4. Forward Charge & Inward Supplies: The "Widest Manner" Doctrine in Anmol Industries

While Power Grid settled the legal status of an RCM recipient, what happens when the tax is payable under forward charge by the vendor? Can a recipient still maintain an advance ruling?

This exact issue came before the Calcutta High Court in Anmol Industries Limited.

The Factual Grid in Anmol Industries

In Anmol Industries Limited & Anr. v. West Bengal Authority for Advance Ruling (MAT 630 of 2023 with IA No. CAN 1 of 2023, decided on 21.04.2023), Anmol Industries entered into a 30-year long-term industrial lease agreement with the Syama Prasad Mookerjee Port, Kolkata (SMPK). Under the terms of the allotment, Anmol was required to pay a one-time upfront lease premium amounting to several crores of rupees.

Anmol contended that this upfront lease premium was exempt from GST pursuant to Entry No. 41 of Notification No. 12/2017-Central Tax (Rate) (which exempts one-time upfront amounts payable for long-term leases of industrial plots provided by State Government industrial development corporations or undertakings).

Because SMPK intended to charge 18% GST on the invoice, Anmol approached the West Bengal AAR. Anmol sought clarity to avoid having substantial working capital locked up in disputed taxes. The West Bengal AAR dismissed Anmol's application at the threshold, ruling that because the lease was an outward supply provided by the port authority under forward charge, Anmol as a recipient lacked locus standi.

Arguments before the Calcutta High Court

• The Revenue's Contention: The Department maintained that Anmol was not "undertaking" the supply of leasing services; the port was. If Anmol obtained a ruling, that ruling would not bind the port under Section 103, creating administrative dissonance.
• The Taxpayer's Contention: Anmol argued that GST is an indirect tax whose commercial and financial incidence falls squarely on the recipient. Under Section 16, a recipient's entitlement to claim credit is conditioned on whether the supply is taxable or exempt. If Anmol paid GST on an exempt supply, claiming ITC would expose Anmol to recovery under DRC-01 show cause notices with interest and penalties. Therefore, Anmol possessed a direct, substantial legal interest in determining the taxability of the transaction.

Operative Ratio of the Calcutta High Court (Verbatim Excerpts)

A Division Bench of the Calcutta High Court, presided over by Hon'ble Acting Chief Justice T.S. Sivagnanam and Hon'ble Mr. Justice Hiranmay Bhattacharyya, reversed the AAR and articulated the expansive doctrine:

"Section 95(c) of the Act defines 'applicant' to mean 'any person registered or desirous of obtaining registration under this Act'. Thus, in our view, the said term has been defined in the most widest possible manner to include any person registered or desirous of obtaining a registration under the Act. The legislature has consciously refrained from restricting the definition of 'applicant' only to a 'supplier'."

"The phrase 'in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant' occurring in Section 95(a) cannot be read in isolation to defeat the right of a registered recipient. Inward supply is an integral part of the supply chain. Where the applicant is a registered person and seeks determination on the applicability of an exemption notification in respect of a transaction in which it is the recipient, the application is maintainable under Section 97(2)."

"Accordingly, the appeal is allowed. The order passed by the West Bengal Authority for Advance Ruling holding the application as not maintainable for want of locus standi is set aside, and the Authority is directed to decide the application afresh on its own merits in accordance with law."

Supporting High Court Jurisprudence

The Anmol Industries ratio is supported by a growing body of constitutional jurisprudence:

1. Calcutta High Court in M/s. Gayatri Projects Ltd. v. Asst. Comm. State Tax (MAT 2027 of 2022, decided 05.01.2023):
   The Division Bench held that the GST framework cannot be fragmented into isolated, adversarial silos. When an advance ruling determines the taxability of a contract between registered entities, the principles of natural justice require that affected recipients have legal standing to seek adjudication of their tax positions.
2. Kerala High Court in Sutherland Mortgage Services Inc. v. Principal Commissioner (2020 (35) G.S.T.L. 40):
   The Court cautioned the AAR against adopting an "excessively hyper-technical approach" to decline jurisdiction. Where an applicant seeks determination on matters within Section 97(2), the authority is under a statutory obligation to entertain the dispute rather than fabricating procedural hurdles.

5. The Section 103 Dilemma: The Bilateral Binding Standoff

Notwithstanding the High Courts' affirmation that recipients can maintain advance ruling applications, taxpayers operating under forward charge face a structural obstacle codified in Section 103(1) of the CGST Act.

Section 103(1) (Verbatim)

"Section 103. Applicability of advance ruling.—
(1) The advance ruling pronounced by the Authority or the Appellate Authority under this Chapter shall be binding only—
(a) on the applicant who had sought it in respect of any matter referred to in sub-section (2) of section 97;
(b) on the concerned officer or the jurisdictional officer in respect of the applicant."

The In Personam Standoff

Unlike judgments of a High Court or the Supreme Court, which establish the law of the land in rem, an advance ruling operates strictly in personam.

┌────────────────────────────────────────────────────────────────────────┐
│                   THE SECTION 103 BILATERAL MISMATCH                   │
├────────────────────────────────────────────────────────────────────────┤
│  Recipient "A" obtains an AAR declaring Vendor "B's" supply exempt.    │
│                                                                        │
│  ➜ Recipient A & Recipient A's Jurisdictional Officer: BOUND.          │
│  ➜ Vendor B & Vendor B's Jurisdictional Officer: NOT BOUND.            │
│                                                                        │
│  Commercial Consequence:                                               │
│  • Vendor B's tax officer may insist the supply is taxable at 18%.     │
│  • Vendor B continues issuing tax invoices with 18% GST.               │
│  • If Recipient A pays the tax, Recipient A's tax officer disallows    │
│    Input Tax Credit, citing Recipient A's own exemption ruling!        │
└────────────────────────────────────────────────────────────────────────┘

This asymmetric statutory binding creates practical friction:

• If Recipient A secures a ruling holding that an inward service is exempt, that ruling binds Recipient A and its assessing officer.
• It does not bind Supplier B or Supplier B's tax officer.
• If Supplier B's assessing officer takes the view that the service is taxable, Supplier B will insist on collecting GST to insulate itself from departmental recovery under Section 73/74.
• If Recipient A pays that GST under protest, Recipient A's assessing officer will deny the Input Tax Credit under Section 16, citing the very AAR ruling Recipient A obtained.

6. Practical Playbook: Drafting Form GST ARA-01 for Recipients

To secure admission under Section 98(2) and mitigate the Section 103 dilemma, tax practitioners and corporate legal teams should adopt a disciplined filing strategy.

1. Strategic Framing of Questions

Never frame an AAR application as an inquiry into the vendor's outward tax classification under Section 97(2)(a). Always frame questions around the recipient's own tax liability under RCM (Section 97(2)(e)) or the recipient's entitlement to Input Tax Credit (Section 97(2)(d)):

2. Preempt Maintainability in Annexure-I

In Form GST ARA-01, under the Statement of Relevant Facts (Annexure-I), incorporate a preliminary section titled "Maintainability of Application by Recipient". Explicitly cite:

• M/s. Power Grid Corporation of India Ltd. v. State of Rajasthan ([2024:RJ-JP:29877-DB], Rajasthan High Court; SLP dismissed by Supreme Court on 18.07.2025).
• Anmol Industries Limited v. West Bengal AAR (MAT 630 of 2023, Calcutta High Court).

Quoting these Division Bench decisions puts the AAR bench on notice that Section 95(c) has been authoritatively held to be framed in the "widest possible manner", making summary rejection for lack of locus standi legally unsustainable.

3. The Commercial Solution: Vendor-Sponsored AAR

For high-value forward charge contracts (such as long-term industrial leases or multi-crore EPC works):

• Incorporate a covenant in the Master Services Agreement (MSA) requiring the supplier to file Form GST ARA-01 before its own jurisdictional AAR.
• The recipient can fund the legal costs and assist in drafting the submissions.
• Because the supplier is the applicant, the ruling binds both the supplier and its assessing authority under Section 103, completely eliminating the bilateral mismatch.

4. Direct High Court Recourse under Article 226

If an AAR bench issues an order rejecting an application at the threshold under Section 98(2) for lack of locus standi, recipients should avoid the Appellate Authority for Advance Ruling (AAAR) if that state AAAR has historically taken a restrictive approach. Instead, file a Writ Petition under Article 226 of the Constitution of India before the jurisdictional High Court.

As demonstrated in Power Grid and Anmol Industries, High Courts do not hesitate to exercise writ jurisdiction to quash arbitrary threshold dismissals, enforce the statutory deeming fictions of the GST Act, and remit applications back to the AAR for determination on the merits.