Chapter 11: Advance Rulings Under GST

ADVANCE RULINGS UNDER GST

Advance rulings refer to decisions taken by the Authority in respect of certain provisions with regard to which a taxpayer is uncertain or confused. It is a written decision given by the tax authorities to an applicant on questions in relation to the supply of goods or services.

Advance ruling helps the applicant plan out his activities which are liable for the payment of GST well in advance. There is a level of certainty and transparency to the taxpayer with regard to an issue which has the potential to cause a dispute with the tax administration.


Importance

The concept of Advance Ruling mechanism helps the taxpayers in several ways.

Some of them include:- 

  • Helps attract foreign direct investments
  • Reduces costs related to litigation
  • Provides certainty to the taxpayer with regard to his tax liability in relation to any activity proposed to be undertaken by him
  • Rulings are pronounced in a transparent and inexpensive manner, encouraging people to opt for the Advance Ruling through the prescribed application


Time Limits for Ruling and Validity

There is no fixed time period for which an Advance Ruling shall apply. However, the Advance Ruling shall be binding only up until the laws, facts, or circumstances supporting the original advance ruling have changed.

In the event that the Authority for Advance Ruling or the Appellate Authority for Advance Ruling finds out that the ruling was obtained by the applicant through some sort of fraud or suppression/misrepresentation of material facts, it shall be void.

However, the void status can be declared only after hearing the applicant.

 

Applicability and Limitations

An Advance Ruling is binding only on the applicant and on the concerned officer or jurisdictional officer in respect of the applicant. What we understand from this is that an Advance Ruling is not applicable to similarly taxable persons in other states.

The Ruling is limited to the person who has applied for an Advance Ruling.

Authority

The Authority for Advanced Ruling which is constituted under the provisions of the State Goods and Services Act or a Union Territory Goods and Services Act shall be deemed to be the Authority for Advanced Ruling with respect to that State or Union Territory under the CGST Act, 2017, as well.

Similarly, the Appellate Authority for Advanced Ruling which is constituted under the provisions of the State Goods and Services Act or a Union Territory Goods and Services Act shall be deemed to be the Appellate Authority for Advanced Ruling with respect to that State or Union Territory under the CGST Act, 2017, as well.

Therefore, since the Authority for Advanced Ruling and the Appellate Authority for Advanced Ruling is constituted under the State/Union Territory Act, the ruling given will be applicable only within the jurisdiction of that particular State or Union Territory.


Application and Process

  • Application is to be made to the Authority for Advanced Ruling in the prescribed form and manner as per the Advance Ruling Rules.
  • Once the application is received, the Authority for Advanced Ruling then sends a copy to the officer under whose jurisdiction the applicant falls.
  • Examination of the application along with the records shall be done by the AAR
  • An opportunity to be heard will be given to the applicant.
  • Finally, the order shall be passed with regard to the admission or rejection of the application. 
  • Where the application has been rejected, it will be communicated by way of a speaking order, the reasons for the rejection will also be informed.
  • Where the application is admitted, the Authority for Advanced Ruling shall pronounce the ruling within 90 days of the receipt of the application
  • Prior to giving its ruling:-
  •  The application shall be examined along with any additional material furnished by the applicant or by the concerned departmental officer.
  • Authority for Advanced Ruling must also hear the applicant/his authorised representative as well as the jurisdictional officers.

Where a difference of opinion arises between two members of the AAR, the points will then be referred to the members of the AAAR for hearing of the issue. Where the members of the AAAR are also unable to come to a conclusion regarding the same, then it shall be deemed that no Advance Ruling can be given on that particular matter relating to which no conclusion was reached.

Hence, we can arrive at the fact that the law makes a comprehensive provision for Advance Rulings to ensure that disputes are minimal, certainty is provided to the taxpayer with respect to his obligations under the GST Act, relationship between the concerned parties continues in a smooth and peaceful manner.