The court rules that third parties cannot challenge advance rulings under GST law, citing lack of locus standi.
In a significant judgment delivered on July 7, 2026, the Karnataka High Court dismissed a writ petition filed by M/s Bangalore Metro Rail Corporation Ltd (BMRCL) against the Karnataka Appellate Authority for Advance Ruling (AAAR). The petition challenged the AAAR's reclassification of GST rates on the supply of train cars by Bharat Earth Movers Limited (BEML). The court, presided by Justices S.G. Pandit and K.V. Aravind, held that BMRCL lacked the locus standi to challenge the order, as it was neither the applicant nor directly bound by the ruling.
The dispute arose from a contract between BMRCL and BEML, wherein BMRCL agreed to reimburse applicable GST to BEML for the supply of train cars. BEML had sought an advance ruling on the GST classification, which was initially favorable but later modified by the AAAR, altering the GST rates applicable to different components of the supply.
BMRCL contended that the AAAR's decision imposed significant financial and civil consequences, warranting a challenge under Article 226 of the Constitution. However, the court ruled that the advance ruling process under the Central Goods and Services Tax Act, 2017, binds only the applicant and the concerned officer, not third parties. The ruling was deemed a decision in personam, and therefore, the court dismissed BMRCL's petition for lack of locus standi.
The judgment underscores the limited scope of advance rulings and the necessity for parties to understand their contractual obligations in the context of GST classifications. The court emphasized that any financial implications stemming from an advance ruling are consequences of contractual arrangements, not grounds for challenging the ruling.
Bottom line:-
A person not party to the proceedings before the Authority for Advance Ruling (AAR) or Appellate Authority for Advance Ruling (AAAR) under the CGST Act, 2017, lacks the locus standi to challenge the orders passed by these authorities under Article 226 of the Constitution of India.
Statutory provision(s): Central Goods and Services Tax Act, 2017, Sections 97, 98, 99, 100, 101, 103; Constitution of India, Article 226.
