AAR: GST Refund on Inverted Duty Not Eligible for Advance Ruling

The company, M/s Hemanth Kumar BS (M/s Hanuman Fashion) [applicant], has filed an application dated December 18, 2025, seeking the Karnataka Authority for Advance Ruling (AAR) Goods and Services Tax (GST) under Section 97 of the CGST Act, 2017, read with Rule 104 of the CGST Rules, 2017, and Section 97 of the KGST Act, 2017, read with Rule 104 of the KGST Rules, 2017.

The applicant’s office is located at No. 41, 2nd and 3rd Floor, 8th Cross, 1st Main Road, Prakruthi Layout, Thotadaguddahalli, Nagasandra, Bangalore-560073 and possesses GSTIN 29AEEPH1574G1ZJ.

The applicant is involved in the business of manufacturing readymade garments. The majority of the applicant’s products are sold on e-commerce platforms, including Myntra, Flipkart, Meesho, and so on. 30% of the selling price is given as e-commerce charges by the applicant, on which it also receives ITC (Input Tax Credit). The applicant discloses that 95% of the output tax rate is 5%, and the rest is 12%.

Questions Asked Before Karnataka AAR:

In the context of the business, the applicant has sought the present Karnataka Authority for Advance Ruling (AAR), asking the following questions:

“Question (a): Due to the application of the formula, we can claim a GST refund of only Rs.20,43,082/- under the Inverted Duty Structure category; hence, please suggest to us how we can claim a refund of the total ITC (including ITC on Input Services), i.e., Rs.55,24,971 (1,45,40,464-90,15,493) or

Question (b): Can we claim a GST refund under the “Refund on Any Other Ground” category, since, without any formula application, we can claim the full refund amount under this category?

Question (c): Please suggest to us the best possible solution to our concern.”

Answers Given by Karnataka AAR:

The Karnataka Authority for Advance Ruling (AAR) has given the following answers to the questions asked by the applicant:

The Authority for Advance Ruling (AAR) has rejected the company’s application under Section 98(2) of the CGST Act, 2017. The said section empowers the AAR to reject an application for an advance ruling in case the questions raised in the ruling are already pending or decided in any previous proceeding (assessment, audit, appeal, etc.) regarding the applicant. The second reason why an application is rejected under the section is when the query does not fall under the ambit of Section 97(2) or if it involves a past transaction rather than a proposed one.