AAR rejects Advance Ruling application on Waste Management Service Classification as Issue already Pending in Tax Proceedings [Read Order]

The Tamil Nadu Authority for Advance Ruling (AAR) has rejected an application seeking clarification on the classification and GST exemption for solid waste management services, as the issue was already pending in tax assessment proceedings.

M/S. Shanmugavel Thevar Sesappan, the applicant filed an application for Advance Ruling under Section 97 of the CGST Act, 2017. The applicant sought a ruling on the classification of their service, 'Solid Waste Management - Revamping of existing dumped garbage in compost yards by Biomining process', provided to Sattur Municipality, and whether the service is exempt from GST under Sl. No. 3 of Notification No. 12/2017-CT.

The applicant, engaged in a works contract with Sattur Municipality for bio-mining legacy waste, contended that their service falls under SAC 9994 for 'Sewage and waste collection, treatment and disposal...' and is eligible for exemption. They argued that the service falls under the constitutional functions of a municipality (Article 243W) and cited a previous favorable AAR ruling. The applicant also noted that they were facing a demand from the tax department for non-payment of GST on this turnover, which was confirmed in an assessment order dated 24-04-2025, against which they were filing an appeal.

The Authority, comprising Shri C. Thiyagarajan, Member (CGST) and Shri B. Suseel Kumar, Member (SGST), did not decide the case on its merits. Instead, it focused on the admissibility of the application under Section 98(2) of the CGST Act, 2017. The provision bars the AAR from admitting an application if the 'question raised... is already pending or decided in any proceedings' against the applicant.

The Authority observed that the tax department had initiated proceedings against the applicant much earlier, with an intimation (DRC-OIA) issued on 22-03-2024 and a subsequent assessment order confirming demand. The applicant filed the AAR application on 11-02-2025, nearly a year after the department's proceedings had begun. The AAR noted that the issue in the department's assessment (taxability of the declared turnover) was the same as the question raised in the advance ruling application (classification and eligibility for exemption).

The reason for initiation of recovery proceeding against the applicant as a result of scrutiny and assessment is akin to the clarification sought by them and therefore, the time line of initiation of scrutiny and assessment and application before the Authority of Advance Ruling need to be seen.

The issue with regard to scrutiny and assessment is the difference due to declaration of turnover in GSTR-9 and GSTR-3B and its taxability which resulted in the non-payment of GST on the turnover declared by the applicant. The queries raised by the applicant in their application is also on the classification and the eligibility of exemption notification.

The two-member bench held that since the issue was already pending in adjudication proceedings initiated by the department, the AAR was barred from admitting the application under the first proviso to Section 98(2) of the CGST/TNGST Acts. Consequently, the advance ruling application was rejected on procedural grounds without delving into the merits of whether the service was exempt.

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