The concept of advance ruling was introduced in the GST regime to bring more clarity in the interpretation of law as the assessee was permitted to seek advance ruling not only with respect to proposed transactions but also with respect to already undertaken activities of the assessee. However, since the GST law is at its nascent stage, a number of clarifications are being issued and amendments are also being made from time to time on receiving representations on various issues. But, sometimes clarifications issued add to more complications as is being observed particularly when the decision pronounced by the advance ruling and the circular are contradictory. The present update seeks to discuss the complications created due to conflicting views of advance ruling and the CBIC.
At the outset, reference is made to the certain issues wherein the opinion of the advance ruling is totally contradictory to the amendment/clarification issued by the government:-
1. Applicable rate of GST on solar power generating systems: Numerous decisions have been given as regards the applicable rate of GST on the supply of solar power generating systems. There have been decisions wherein AAR have ruled that the installation of solar power generating system is works contract liable to GST at the rate of 18% even when there is concessional GST rate of 5%. This issue has been represented to the government and recently there has been amendment in the notification no. 1/2017-Central Tax (Rate) dated 31.12.2018 wherein Explanation has been added regarding computation of deemed value of goods in the composite supply of installation of solar power generating system to be seventy percent of the gross consideration charged. This notification is applicable with effect from 31.12.2018.
2. Applicability of GST exemption to certain courses provided by IIMs after enactment of IIM Act: The AAR Bangalore and Madhya Pradesh has held that the IIM is not entitled for general exemption contained in serial no. 66(a) of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 after enactment of IIM Act. However, recently a clarification has been issued by the government which is contrary to the decision of the advance ruling. Circular No. 82/01/2019-GST dated 01.01.2019 has clarified the applicability of GST on various programmes conducted by IIM and has held that after enactment of IIM Act, the general exemption contained in serial no. 66(a) of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 is admissible to IIMs for courses which are recognised by law. It is worth noting that the AAR Bangalore and AAR Madhya Pradesh has ruled against IIM whereas the clarification is issued in favour of IIM.
3. Confusion as regards classification of activity of bus body building as supply of goods or supply of services: There have been certain advance ruling concluding that activity of bus body building is supply of goods whereas there have been certain other advance ruling concluding that the activity is supply of service. However, a clarification has been issued vide Circular No. 52/26/2018-GST dated 09.08.2018 as regards the guidelines to be followed for classifying the said activity.
It is pertinent to mention that the provision contained in sub-section (2) of the section 103 states that the advance ruling shall be binding unless the law, facts or circumstances supporting the original advance ruling have changed. With respect to the examples listed above, there has been amendment in the provision with respect to computation of GST liability in case of installation of solar power generating system w.e.f. 31.12.2018 and so the said amendment will prevail over all assessees including those who sought advance ruling. As such, it can be concluded that the advance ruling stating GST liability at the rate of 18% on installation of solar power generating system would prevail only upto 30.12.2018 and w.e.f. 31.12.2018, all assessees are bound to follow the amendment carried in the notification no. 1/2017-Central Tax (Rate) dated 31.12.2018. However, what will be the position in case of issuance of circulars post decisions pronounced by the advance rulings? The situation is very well covered by the example no. 2 and 3 discussed above. Whether the advance ruling will be binding or the clarification issued by the government? The binding nature of the circulars vis a vis the decision pronounced by the authority for advance ruling will be discussed in our next update.