Tamil Nadu AAR Dismisses Advance Ruling Plea Due to Pre-existing GST Assessment Proceedings

Background of the Case

The Authority for Advance Ruling (AAR), Tamil Nadu, examined a request submitted by M/s. Murali Pharmacy (Prop: Narayanasamy Thangaiah Rajendran Balasubramanian), a proprietorship entity operating a registered pharmacy business. The enterprise was involved in trading pharmaceutical products, critical life-saving medications, and healthcare equipment, procuring inventory through both intra-state and inter-state channels.

The proprietorship maintained valid registration under the Goods and Services Tax regime and had consistently fulfilled its obligations regarding return submissions and tax remittances. The central issue that prompted the advance ruling application stemmed from changes in the registration threshold limits and their applicability to existing registrants.

Factual Matrix and Applicant's Contentions

Initial Compliance Period

During the financial year 2018–19, the pharmacy's aggregate annual receipts crossed the ₹20 lakh threshold, triggering the mandatory registration requirement. The applicant dutifully collected Goods and Services Tax from customers and deposited the amounts to the government treasury during this period.

Threshold Revision and Its Impact

The Central Government issued Notification No. 10/2019-CT dated 07.03.2019, which substantially modified the registration threshold for suppliers dealing in goods. The revised notification raised the floor from ₹20 lakh to ₹40 lakh, taking effect from 01.04.2019.

For the financial year 2019–20, the pharmacy's annual turnover totaled ₹30,96,227, falling below the revised ₹40 lakh threshold. Despite continuing with the GST registration due to operational requirements involving inter-state procurement of pharmaceutical supplies, the proprietor chose not to collect tax from end customers, believing the enhanced threshold exemption applied to their situation.

The applicant constructed their case on several statutory provisions:

  • Section 22 concerning liability for registration
  • Section 23 dealing with persons not liable for registration
  • Section 39 governing furnishing of returns
  • Section 7 defining the scope of supply
  • Section 2(6) defining aggregate turnover
  • Section 9(1) concerning levy and collection of tax

The fundamental contention was that Notification No. 10/2019-CT dated 07.03.2019 provided exemption from tax collection obligations when turnover remained below ₹40 lakh, regardless of existing registration status. The applicant maintained that this benefit was extended to customers through non-collection of tax, even while bearing the input tax burden on purchases from suppliers.

Questions Referred for Advance Ruling

The application sought authoritative clarification on two critical questions:

  1. Whether tax liability existed for turnover below the ₹40 lakh threshold as specified in Notification No. 10/2019-CT dated 07-03-2019?

  2. Whether the exemption provisions under Notification No. 10/2019-CT dated 07-03-2019 extended exclusively to fresh registrants or equally applied to persons already registered before 01-04-2019?

Hearing Proceedings

Dr. S. Sankar Ganesh, Proprietor of M/s. NS Law Firm serving as the authorized representative, along with Shri. A. Satheesh Murugan and Shri. J. Karthikumar, both Advocates, represented the applicant during the third scheduled hearing on 17-12-2025.

The representatives had remained absent during two earlier hearing dates scheduled on 07-10-2025 and 11-11-2025. However, written submissions dated 07-10-2025 accompanied by supporting documentation were filed during the first hearing date.

A significant disclosure emerged during the written submissions wherein the authorized representative acknowledged that scrutiny notices had been issued to the applicant, and adjudication orders had already been passed by the assessing authority, confirming demands spanning the years 2019-20 to 2021-22.

The Authority members specifically questioned whether the issues raised in the advance ruling application overlapped with matters already under departmental proceedings, referring to the bar under Section 98 of the CGST Act.

Timeline Analysis and Procedural Lapses

Critical Chronological Events

The Authority meticulously examined the sequence of events to determine whether assessment proceedings preceded or followed the advance ruling application:

24.02.2023: The assessing officer issued Form GST ASMT-10 to the applicant. This form represents the formal communication when tax authorities identify discrepancies during scrutiny of returns including GSTR-1, GSTR-3B, and GSTR-9/GSTR-9C, seeking explanations from the assessee.

27.04.2023: The applicant submitted the advance ruling application through the online portal, subsequent to receiving the scrutiny notice from the department.

01.07.2024: The proper officer issued three separate adjudication orders in Form GST DRC-07 covering financial years 2019-20, 2020-21, and 2021-22, confirming tax demands and interest.