Advance ruling under GST

Advance ruling means a decision provided by the authority to an applicant on matters or on questions in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant. An advance ruling helps the applicant in planning his activities which are liable for payment of GST, well in advance. Seeking an advance ruling is inexpensive and the procedure is simple and expeditious.

The main objectives for setting up mechanism of advance ruling are-

• Provide certainty in the tax liability in advance in relation to an activity proposed to be undertaken by the applicant
• Attract foreign direct investment (FDI) by ensuring certainty in taxation aspects of the transactions
• Reduce litigation
• Transparent and inexpensive manner

Matters for which advance ruling may be opted

Under GST advance ruling can be obtained on a proposed transaction as well as a transaction already undertaken by the applicant.

It can be sought for the following questions-

1. Classification of goods or services or both
2. Applicability of a notification issued under CGST act
3. Determination of time and value of supply
4. Admissibility of input tax credit of tax paid
5. Determination of the liability to pay tax on any goods or services or both
6. Whether applicant is required to be registered
7. Whether an activity is supply or not

It is to be noted that questions on determination of place of supply cannot be raised with the authority for advance ruling.

Authority and appellate authority for advance ruling

Authority for advance ruling is located in each state/union territory under CGST act. The government shall appoint officers not below the rank of joint commissioner as member of authority for advance ruling. The appellate authority for advance ruling shall be constituted in each state/UT. Thus, it can be seen that both the authority for advance ruling and appellate authority for advance ruling is constituted under the respective state and not under the central act. Ruling given by appellate authority is applicable only within jurisdiction of the concerned state.

Procedure for obtaining advance ruling

• The applicant who wants to obtain advance ruling should make an application to AAR in prescribed form and manner along with fee of 10000(5000 each under CGST and SGST)
• Upon receipt of application, the AAR shall send copy of application to the concerned officer and call for all relevant records from the concerned officer. Records called by AAR to be returned at the earliest.
• AAR has the discretion to admit or reject an application based on the records and after hearing the concerned parties.
• AAR shall not admit application where question raised in the application is already pending or decided in any proceedings in case of an applicant under any of provisions of this act.
• Opportunity of being heard to be given before rejection and reasons for rejection should be stated.
• Where members of AAR differ on any question a reference to appellate authority should be made.
• Appellate authority to whom reference is made, is required to pronounce ruling within 90 days of such reference.
• AAR shall pronounce its advance ruling in writing within 90 days of the receipt of application.

Appeals to appellate authority

Appeals against order of AAR can be made to the appellate authority.it can be filled by either concerned or jurisdictional officer or applicant whoever is aggrieved by ruling given by AAR. This appeal can be made in form GST ARA 2 together with fees of Rs. 10000/-

Time limit to file appeal is within 30 days from the date of receipt of the ruling and it can be extended for another 30 days.

Order of appellate authority

Order to be passed within 90 days of date of filing appeal. If there is a difference of opinion between members on the question covered under appeal then it would be considered that no advance ruling is issued in the matter.

Rectification of advance ruling

The application for rectification can be made within 6 months and cannot result in substantial amendment of the order. If the rectification results in increase in tax liability or reducing of input credit then a hearing has to be given to the applicant.

Applicability of advance ruling

Advance ruling is binding only on applicant and on jurisdictional officer in respect of applicant. The advance ruling shall be binding on the said persons/authorities unless there is a change in law or facts or circumstances on the basis of which the advance ruling has been pronounced.

Advance ruling to be void in certain circumstances

If authority find that ruling has been obtained by fraud or suppression of facts or misrepresentation then ruling shall be declared void ab initio. The period beginning with the date of advance ruling and ending with the date of order shall be excluded in computing the period for issuance of show cause notice and adjudication order respectively.

Powers of authority

Both the AAR and AAAR are vested with the powers of a civil court under code of civil procedure i.e., discovery and inspection, enforcing attendance, examination on oath, issuing commissions and compelling production of books of accounts.

Important sections