GST

Advance Ruling under GST

An advance ruling means a written interpretation of tax laws issued by tax authorities appointed under an Act to corporations and individuals seeking clarification on specific tax matters. An advance ruling is often sought when the taxpayer is unclear or uncertain about particular law provisions. An advance ruling is always sought before starting the proposed activity. Advance Ruling under GST is covered under Chapter XVII of the CGST Act, 2017, from sections 95 to 106 and rules 103 to 107A of Chapter XII under the CGST Rules.

What is the objective behind providing advance rulings?

The objective behind advance rulings under GST is to:

1. Provide tax certainty relating to a future activity yet to be undertaken by the applicant;
2. Attract Foreign Direct Investment by clarifying tax-related issues of non-residents who do not want to get involved in tax disputes;
3. Reduce litigation and prevent tax disputes;
4. Provide timely decisions transparently and inexpensively.

Who can apply for an advance ruling?

The following persons can make an application for an advance ruling:

1. Any registered person; or
2. Any person desirous of obtaining registration.

When can a person request for Advance Ruling under GST?

Advance ruling under GST can be sought on the following grounds:

1. Classification of any goods or services or both;
2. Determination of time and value of supply of goods or services or both;
3. Applicability of notification issued under the provisions of this Act;
4. Admissibility of input tax credit of tax paid or deemed to have been delivered;
5. Whether the applicant is required to be registered;
6. Determination of tax liability on any goods or services or both;
7. To know whether any act done by the applicant in respect of any goods or services or both amounts to or results in the supply of those goods or services.

How is Advance Ruling Authority constituted?

Advance Ruling Authority is an authority that gives advance rulings. It is formed under the provisions of the Goods and Services Tax Act¹ or Union Territories Goods and Services Tax Act.

What is the procedure to be followed on receiving an advance ruling application?

Step 1: After receiving a copy of an application, the Advance Ruling Authority has to pass on a copy of the application to the concerned officer. The Advance Ruling Authority may call him to furnish the relevant records if required.

Step 2: Take a closer look at the second step, the application and the records called for, and hear the applicant, the authorized representative, and the concerned officer or his authorized representative to either admit or reject the application. However, if an application is already pending or decided in any proceedings in the case of the applicant only, then the Authority will not admit the application. The Authority must hear the applicant and the concerned officer before accepting or rejecting an application. In case of rejection of an application, the reasons must be stated in the order.

Step 3: A copy of the order of admission or rejection will be forwarded to the applicant and the concerned officer.

Step 4: After the application has been admitted, the Authority has to examine the materials placed before it and allow the applicant and the concerned officer to be heard before passing any advance ruling order.

Step 5: A reference is made to the Appellate Authority for hearing and deciding a case, whenever the members of the Authority disagree on any question requiring an advance ruling. Before referring, they shall state the points on which they differ.

Step 6: Once the advance ruling has been pronounced, a duly signed copy shall be forwarded to the applicant, the concerned officer, and the jurisdictional officer. The pronouncement shall be binding on all three.

Appeal before the Appellate Authority for Advance Ruling

Suppose the applicant, concerned officer, or jurisdictional officer is not satisfied by the order of the Advance Ruling Authority. In that case, they can appeal before the Appellate Authority for Advance Ruling. The appeal shall be filed within 30 days from the date the ruling in the appeal was communicated to the applicant, concerned officer, or jurisdictional officer. An appeal can be allowed after the expiry of 30 days only if the Appellate Authority is satisfied that the appellant was prevented by sufficient cause from presenting a request within the time limit.

When can rectification of the advance ruling take place?

The Advance Ruling Authority or the Appellate Advance Ruling Authority can rectify or amend their order if they find any error apparent on the face of the record either on its own accord or is brought to the notice by the concerned officer, the jurisdictional officer, the applicant or the appellant. Subject to a condition that the rectification can be done only within six months from the order date. Subject to a further requirement that no rectification has the effect of either being necessary to increase the tax liability or reduce the input tax credit amount without giving an opportunity of being heard to the applicant or the appellant. 

What are the circumstances in which Advance Ruling will be void?

When the Advance Ruling Authority or the Appellate Advance Ruling Authority finds that the order obtained by the applicant or the appellant is by fraud, misrepresentation or suppression of material facts, then such an order is void-ab-initio. After that, all the provisions of this Act or the rules shall apply to the applicant or the appellant as if such an advance ruling was never made.

What are the powers of Authority for Advance Ruling and Appellate Authority for Advance Ruling?

The Advance Ruling Authority & the Appellate Authority shall have the same powers under the Code of Civil Procedure, 1908, as in the Civil Code. They shall have the ability to:

1. Discover and inspect;
2. Issue commissions and compel production of books of account and other accounts;
3. Enforce the attendance of any person and examine him on oath.

The proceeding of the Authority and the Appellate Authority are considered judicial proceedings under sections 193 and 228 of CPC and for section 196 of the Indian Penal Code.

What procedure is followed by the Advance Ruling Authority and Appellate Authority for Advance Ruling?

The Advance Ruling Authority and Appellate Authority for Advance Ruling shall have the power to regulate its proceedings.

What are the forms associated with the filing of Advance Ruling?

The application for advance ruling shall be filed on the common portal in FORM GST ARA-01 and accompanied by a fee of INR 5000/-. Any appeal by the applicant against the Authority for Advance ruling order shall be made on the common portal in FORM ARA-2 and accompanied by a fee of INR 10,000/-. If the concerned officer is filing the appeal, it must be filed on the common portal in FORM GST ARA-3, and the officer shall pay no fee for filing the request.

Conclusion

In summation, the advance ruling is a mechanism whereby taxpayers can resolve genuine queries and ambiguities. This will also protect them from unnecessary tax disputes and litigation. It is also a two-stage process, so if you’re unhappy with the Advance Ruling Authority’s decision, you can apply before the Appellate Forum, whose decision will be binding.

FAQs

Read Our Article: Advance Ruling Provision under GST

1. https://www.gst.gov.in/