The Original Promise Behind Advance Ruling under GST
One of the most ambitious features introduced under the GST regime was the Advance Ruling mechanism. At a time when businesses across India were attempting to understand an entirely new indirect tax framework, the legislature aimed to establish a system that offers certainty before disputes even occur. The underlying idea was commercially significant yet jurisprudentially simple: taxpayers should not be compelled to engage in lengthy litigation just to determine the tax consequences of a proposed transaction. Instead, the law sought to create a mechanism to provide clarity in advance on issues such as classification, tax rates, eligibility for input tax credit, liability assessment, and related matters.
Chapter XVII of the CGST Act, 2017, established the framework for Advance Rulings with this goal. Section 95 defines “advance ruling," while Sections 96 to 106 set out the institutional and procedural provisions for applications, appeals, and the binding nature of rulings. The mechanism was aimed at minimising litigation, enhancing certainty, and promoting voluntary compliance. Essentially, an Advance Ruling was designed as a bridge between the administration and commerce, a system not just for resolving disputes but also for preventing them.
As GST developed within India's federal system, a practical challenge arose. Since the Advance Ruling Authorities operate independently in various States and Union Territories, inconsistent interpretations of the same legal issues have appeared. A transaction considered taxable in one State might be viewed differently in another. Similarly, an exemption granted by one Appellate Authority may be denied in another jurisdiction. The mechanism intended to bring clarity sometimes led to confusion at the national level.
The Questions on Which an Advance Ruling May Be Sought
The scope of the Advance Ruling Authorities is precisely limited by Section 97(2) of the CGST Act. The law does not allow advance rulings on all possible GST issues. The restriction is deliberate because the Advance Ruling was never intended to serve as a parallel adjudicatory mechanism for all disputes arising under GST. Parliament consciously confined the jurisdiction to specific commercial questions capable of materially affecting business certainty and compliance planning. These questions include the classification of goods or services or both, the applicability of notifications, the time and value of supply, the admissibility of input tax credits, the calculation of tax liability, registration requirements, and whether a certain activity qualifies as a supply.
This limited jurisdiction highlights the legislative intent behind the Advance Ruling framework. The objective was not to turn the Authority into a general advisory body, but to provide clarity on specific commercial and tax-related issues affecting business decisions. In practice, Advance Rulings are especially important in sectors with complex classification disputes, composite supplies, intermediary services, real estate transactions, export benefits, and eligibility for input tax credit.
The mechanism is significant because the ruling binds not only the applicant but also the relevant jurisdictional officer. As a result, an Advance Ruling has direct commercial implications, going beyond simple legal interpretation. Businesses frequently base their contracts, pricing strategies, and operational plans on these rulings. This is why conflicting rulings across States ultimately posed a serious challenge, prompting legislative intervention.
When Different States Started Speaking in Different Voices
India's GST system is distinct because, despite aiming for a unified framework, Advance Ruling Authorities still operate separately across various States and Union Territories. Although this decentralised setup initially seemed effective, the rise in litigation led to instances where different States issued conflicting rulings on similar legal issues.
An illustration of conflicting Advance Rulings emerged regarding the applicability of GST to remuneration paid to directors. In Clay Craft India Pvt. Ltd., bearing Advance Ruling No. RAJ/AAR/2019-20/33 dated 20.02.2020, the Rajasthan Authority for Advance Ruling held that remuneration paid by the company to its directors would attract GST under the reverse charge mechanism in terms of Entry No. 6 of Notification No. 13/2017-Central Tax (Rate) dated 28.06.2017 issued under Section 9(3) of the CGST Act, 2017. The Authority substantially proceeded on the basis that services rendered by directors to the company constituted taxable supplies liable to GST under the reverse charge mechanism.
However, a materially different interpretational approach subsequently emerged before the Karnataka Authority for Advance Ruling in M/s Anil Kumar Agrawal, reported in 2020 (5) TMI 221 (AAR-Karnataka). The Karnataka Authority drew a distinction between Executive Directors functioning as employees and Non-Executive Directors rendering services independently to the company. It was observed that where the director operates as an employee of the company, the services rendered in the course of employment would fall within Schedule III of the CGST Act, 2017 and therefore remain outside the scope of supply. Conversely, remuneration paid to a Non-Executive Director for independent services rendered to the company would be subject to GST under the reverse charge mechanism under Section 9(3) read with Notification No. 13/2017-Central Tax (Rate). Since the applicant failed to produce sufficient documentary evidence, such as appointment terms, employment agreements, PF deductions, or ESI records, the Karnataka Authority declined to conclusively determine whether the applicant was functioning as an Executive Director or a Non-Executive Director.
The two rulings thus revealed substantially different interpretational approaches adopted by the Advance Ruling Authorities of different States on a closely similar legal issue. While the Rajasthan Authority broadly treated director remuneration as taxable under the reverse charge mechanism, the Karnataka Authority recognised the distinction between the employer-employee relationship and independent professional services rendered by directors. Such conflicting rulings clearly demonstrated the practical difficulties faced by businesses operating across multiple States and highlighted the growing need for a centralised appellate mechanism to ensure national uniformity in GST interpretation.
The Legislative Vision Behind the National Appellate Authority
To resolve these issues, Parliament passed Sections 101A to 101D through the Finance (No. 2) Act, 2019, creating the National Appellate Authority for Advance Ruling (NAA). This body was established as a specialised national appellate entity to address inconsistencies among Advance Rulings issued by Appellate Authorities in different States or Union Territories.
Section 101B is significant because it explicitly defines the jurisdiction for filing appeals before the NAA. These appeals are limited to cases with conflicting decisions from different States or Union Territories concerning issues under Section 97(2).The provision therefore recognises that the same legal issue affecting distinct registrations of a single entity across multiple States may otherwise produce commercially unworkable results.
They can be initiated by authorised officers of the relevant States or by particular individuals listed in Section 25 who are affected by contradictory rulings impacting various registrations.
The legislative framework aimed to balance India's federal GST structure with the need for a consistent national interpretation of the law. However, even after Sections 101A to 101D were added in 2019, the National Appellate Authority was never established. Additionally, Section 101B remained unenforced. As a result, despite acknowledging the issue of conflicting rulings and establishing a statutory appellate process, the necessary institutional mechanism was still absent.Consequently, although the statutory framework existed on paper, the appellate remedy contemplated under Section 101B remained practically unavailable.
The Continuing Vacuum and the Need for a Transitional Arrangement
The non-constitution of the National Appellate Authority gradually led to a unique legislative gap. Companies encountering conflicting Advance Rulings in various States found no practical appellate solution within the GST system. Without a centralised forum, contradictory legal interpretations could continue endlessly, as there was no mechanism to unify them.
Against this backdrop, the Finance Act, 2026, inserted Section 101A(1A) effective from 01.04.2026. This change represents a key legislative development because it allows the Government to notify any "existing Authority" established under any law to hear appeals under Section 101B, rather than waiting for the formal setup of the National Appellate Authority. Notably, the provision explicitly states that such existing authorities can include Tribunals.
The amendment establishes a practical transitional framework. It acknowledges the practicalities of commerce and seeks to implement the appellate mechanism without delaying the formation of a fully independent National Appellate Authority. In essence, the amendment indicates legislative recognition that conflicting Advance Rulings have become a substantial issue that cannot be left unresolved within the current system.It is in this legislative and institutional background that Notification No. 18/2024-Central Tax assumes considerable importance.
Notification No. 18/2024-Central Tax - GSTAT Steps into the Transitional Role
Under the authority granted by Section 101A(1A), Notification No. 18/2024-Central Tax dated 07.05.2026 empowers the Principal Bench of the GST Appellate Tribunal (GSTAT) in New Delhi to hear appeals under Section 101B. This notification is deemed to have come into force from 01.04.2026. The development is particularly significant because GSTAT is now gradually becoming operational across India, following considerable institutional delay.
The significance of this transitional arrangement extends far beyond mere administrative delegation. Essentially, the notification designates the Principal Bench of GSTAT as the interim national appellate body for resolving conflicts in Advance Rulings issued by various States and Union Territories. Until the National Appellate Authority is officially established and Section 101B is brought into force, the GSTAT's Principal Bench will perform this key appellate role.
This transitional arrangement could greatly impact future GST jurisprudence. It marks the first time a centralised appellate body will review conflicting Advance Rulings from different States within a single judicial framework. Consequently, the notification-driven framework carries the potential to enhance consistency, predictability, and harmonisation in the interpretation of GST law throughout India.The arrangement may also gradually influence the future evolution of GST jurisprudence in India. Since conflicting rulings from different States are now beginning to reach a centralised appellate forum, the possibility of developing more stable and nationally persuasive interpretational standards may increase significantly. Over time, this could help reduce fragmentation in GST interpretation across States and strengthen confidence in the Advance Ruling framework.
A Transitional Step Towards Uniformity
The shift from State-level Advance Rulings to a nationwide appellate system mirrors the broader development of GST. A tax system designed to realise "One Nation, One Tax" cannot sustain conflicting legal interpretations among States indefinitely.A nationally integrated tax structure cannot achieve genuine uniformity if identical legal questions continue receiving divergent interpretational treatment across different jurisdictions. The addition of Section 101A(1A) and the issuance of Notification No. 18/2024-Central Tax are more than just procedural changes; they represent an institutional effort to restore uniformity within India's evolving GST framework. The development is also likely to assume considerable importance for national compliance planning. Businesses operating across multiple States frequently seek uniformity in contractual structuring, tax positions and operational models. A centralised appellate approach towards conflicting Advance Rulings may therefore gradually improve commercial certainty and reduce the risk of fragmented compliance strategies across jurisdictions.
The arrangement remains transitional as the National Appellate Authority, outlined in the original statutory framework has not yet been established, and Section 101B is still awaiting enforcement. However, the current mechanism prevents conflicting Advance Rulings from persisting without a practical appellate solution.
In many ways, the emerging appellate framework demonstrates how GST law continues to evolve through a combination of legislative adaptation and institutional pragmatism. The journey of Advance Ruling under GST, therefore, reflects India's continuing effort to reconcile federal tax administration with the larger constitutional aspiration of achieving genuine national uniformity in indirect taxation.
By CA Raj Jaggi and Adv. Kirti Jaggi, Assistant Professor, Asian Law College, Noida
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