In re Aadinath Agro Industries (GST AAR Rajasthan)
Rajasthan Authority for Advance Ruling (AAR) has ruled that M/s Aadinath Agro Industries, a spice processing firm, is not eligible for an exemption from Rule 86B of the Central Goods and Services Tax (CGST) Rules, 2017, despite the combined income tax paid by the firm and its partners exceeding the specified threshold. The ruling, In re Aadinath Agro Industries (GST AAR Rajasthan), emphasizes a strict interpretation of the rule, which mandates cash payment of at least 1% of monthly GST liability for taxpayers with a taxable turnover exceeding ₹50 lakh.
Aadinath Agro Industries, with a monthly turnover surpassing ₹50 lakh, sought clarification on whether the aggregate income tax paid by the partnership firm and its individual partners could be considered for the exemption provided under Rule 86B. The rule stipulates that the restriction on using Input Tax Credit (ITC) for over 99% of output tax liability does not apply if, among other conditions, “any of its two partners” have paid more than ₹1 lakh as income tax in each of the last two financial years. For FY 2023-24, the firm and its partners collectively paid ₹1,04,427 in income tax, and for FY 2022-23, the total was ₹1,38,838. However, no single partner individually paid more than ₹1 lakh in either year, and the firm itself had ₹0 tax liability for FY 2023-24. The applicant argued for a cumulative interpretation, citing the financial interdependence of a partnership firm and its partners, and the legislative intent of Rule 86B to prevent fraudulent ITC claims, not to burden genuine taxpayers.
