What is Advance Ruling?
An advance ruling helps the applicant in planning his activities which are liable for payment of GST, well in advance. It also brings certainty in determining the tax liability, as the ruling given by the Authority for Advance Ruling is binding on the applicant as well as Government authorities.
Further, it helps in avoiding long drawn and expensive litigation at a later date. Seeking an advance ruling is inexpensive and the procedure is simple and expeditious. It thus provides certainty and transparency to a taxpayer with respect to an issue which may potentially cause a dispute with the tax administration. A legally constituted body called Authority for Advance Ruling (AAR) can give a binding ruling to an applicant who is a registered taxable person or is liable to be registered. The advance ruling given by the Authority can be appealed before an Appellate authority for Advance Ruling (AAAR). There are time lines prescribed for passing an order by AAR and by AAAR. The definition of Advance ruling given under the Act is a broad one and an improvement over the existing systems of advance rulings under Customs and Central Excise Laws.
Under the present dispensation, advance rulings can be given only on a proposed transaction, whereas under GST, Advance ruling can be obtained on a proposed transaction as well as a transaction already undertaken by the appellant.
Why Is Advance Ruling Under GST Necessary?
1) Provide certainty for tax liability in advance in relation to a future activity to be undertaken by the applicant
2) Attract Foreign Direct Investment (FDI) - By clarifying taxation and showing a clear picture of the future tax liability of the FDI. The clarity and clean taxation will attract non-residents who do not want to get involved in messy tax disputes.
3) Reduce litigation and costly legal disputes
4) Give decisions in a timely, transparent and inexpensive manner
What Are The Matters/Questions Specified In Section 97(2) & Section 100(1) Of The CGST Act, 2017?
(a) Classification of any goods or services or both
(b) Applicability of a notification issued under the provisions of CGST Act
(c) Determination of time and value of supply of goods or services or both
(d) Admissibility of input tax credit of tax paid or deemed to have been paid
(e) Determination of the liability to pay tax on any goods or services or both
(f) Whether applicant is required to be registered.
Procedure on receipt of application
On receipt of an application, a copy will be forwarded to the prescribed officer and he will furnish the necessary relevant records.
Process of Advance Ruling under GST
An advance ruling is first sent to Authority for Advance Ruling (Authority). Any person unhappy with the advance ruling can appeal to the Appellate Authority for Advance Ruling (Appellate Authority).
Application for Advance ruling has to be made in FORM GST ARA-01 along with Rs. 5,000. Decision of the Authority The Authority can by order, either admit or reject the application.
The Authority will NOT admit the application when-
1) The same matter has already been decided in an earlier case for the
2) The same matter is already pending in any proceedings for the applicant
Basically, Advance Ruling will not be possible in any pending case or any decision already given. Applications will be rejected only after giving an opportunity of being heard. Reasons for rejection shall be given in writing.
When will the authority give their decision?
Advance ruling decision will be given within 90 days from application. If the members of the Authority differ in opinion on any point, they will refer the point to the Appellate Authority. Advance Ruling will have prospective effect only.
On whom will the advance ruling apply?
The advance ruling will be binding only -
- On the applicant
- On the jurisdictional tax authorities in respect of the applicant.
If the law, facts of the original advance ruling change then the advance ruling will not apply. Appeal to the Appellate Authority If the applicant aggrieved by the advance ruling he can appeal to the Appellate Authority. Appeal against advance ruling must be made within 30 days (extendable by 30 days) from the date of the advance ruling in Form GST ARA-02 along with fees of 10,000.