Advance Ruling Under GST : All We Need to Know

Advance Ruling

  • What is an advance ruling?

An Advance Ruling is a mechanism for the person registered or the personal desire to obtain registration under this act to seek clarity on tax aspects concerning the supply of goods or services being undertaken or proposed to be undertaken by them, thus reducing unwanted differences and litigations that may arise in future.

  • Importance of Advance Ruling under GST
    • Provides certainty in a tax liability of the applicant in advance with the activity planned, so that the applicant can strategize the future course of action,
    • Aids in providing a clear and clean taxation system of the FDI, as the main concern for the non-residents is that they do not want to get involved in petty tax disputes,
    • Reduces litigation and costly legal disputes,
    • The applicant can clear all his qualms more transparently.
  • To whom the Advance Ruling is applicable

It is to be noted that advance ruling is only applicable to the person who has applied for such advance ruling. Hence, it is not applicable to similarly placed other taxable persons in the State.

Further, the ruling will be applicable only within the jurisdiction of the concerned state or union territory.

Note: – The ruling given by the Authority for Advance Ruling is binding on the applicant as well as on the concerned/ jurisdictional officer.

Advance Ruling Under GST : All We Need to Know

  • What are the Clarifications/Matters for which advance ruling can be sought?

Sub-section (2) of Section 97, of the CGST Act, 2017 specifies the matters on which the advance ruling can be sought under this Act. The list is as follows :

  • Classification of any goods and services or both
  • Determination of time, value, and supply of goods and services or both
  • Applicability of a notification issued under the provisions of CGST Act
  • Admissibility of an input tax credit of tax paid or deemed to have been paid
  • Whether the applicant is required to be registered
  • Determination of the liability to pay tax on any goods or services or both
  • Whether any particular transaction is a supply of goods or services or both.

Advance Ruling Under GST : All We Need to Know

  • Certain cases where application of advance ruling have been rejected.
S.No. Issue Related AAR/AAAR Reason for Rejection
1. Determination of export of services-POS Banyan Tree Advisors (P) Ltd. [2019] [AAR-KARNATAKA] dated 12th Sept 2019 The applicant’s question was related to place of supply and it is not a matter on which the authority is empowered to give an advance ruling.
2. Provisions related to e-way bill Tamil Naidu Edibile Oil (2019) [AAR-Tamil Nadu] dated 21st May 2019 The issue sought for advance ruling related to the provisions of e-way bill which does not fall within the ambit of the Authority.
3. Period of activity is past-period Shyam Singh Champawat (RAJASTHAN) RAJ/AAR/2018-19/33 dated 31st Jan 2019 The period of activity undertaken falls in past period i.e. 2017-2018. Only matters which are either being undertaken or are proposed to be undertaken qualifies for advance ruling.
4. Non-payment of entire fees for advance ruling Kreations Builders & Developers [2019] [AAR-MAHARASTRA] dated 23rd Jan 2019 It is mandatory to pay applicable fees under the Act. Failure to do so, the application will be considered incomplete.
  • Procedure for obtaining advance ruling:-
    • The applicant who wants to obtain an advance ruling is required to apply form GST ARA-01 with fees of five thousand rupees each under CGST & the respective state GST act under which the application is made.
    • The AAR (Authority for Advance Ruling) may then examine the application along with the records and may also hear the applicant. Thereafter it is up to the authority to decide whether to accept the application or reject the application.
    • Application of advance ruling will not be accepted, where the question raised in the application is already pending or decided in any proceedings in the case of an applicant under any of the provisions of this Act.
    • If the application is rejected, it should be only after an opportunity of being heard is provided to the applicant and by way of a speaking order specifying the reasons for rejection.
    • If the application is admitted, the decision of the AAR should be pronounced within 90 days from the date of receipt of the application. Furthermore, if the members of the AAR differ on any point, then such point of dispute shall be referred to the AAAR (Appellate Authority for Advance Ruling.).
    • A copy of the advance ruling duly signed by the members shall be sent to the applicant, the concerned officer & the jurisdictional officer.

  • Whether appeal can be filed against the decision of Advance Ruling
    • If the applicant or the concerned officer or jurisdictional officer does not agree with the findings of AAR, they can file an appeal with AAAR.
    • The decision of the AAAR is also treated as an advance ruling.
    • Any appeal must be filed within 30 days from receipt of the advance ruling, the applicant is required to file an appeal in form GST ARA-02 with fees of ten thousand rupees.
    • An appeal may also be filed by the concerned officer or jurisdictional officer in form GST ARA-03, where no fee is required to be paid for filing such an appeal.
    • The AAAR must pass an order on the appeal filed, within 90 days of the filing of an appeal.

  • Conclusion

To conclude, we can say that the objective of the advance ruling is to provide certainty to the applicant, and it also ensures that disputes are minimized. Advance Ruling can even increase the scope of interpretation of the law. It is beneficial for the applicant to file an advance ruling for planning in case the transactions being undertaken or to be undertaken are complex and involves huge capital investment.

This content is meant for information only and should not be considered as an advice or legal opinion, or otherwise. AKGVG & Associates does not intend to advertise its services through this.

Posted by:

CA Tarun Kapoor

AKGVG & Associates

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