Advance Ruling under GST

Govt. Agencies and Taxation | Comments (0)

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Advance Ruling is an imperative legal process under GST law which provide certainty to the taxpayer with respect to its obligations under the GST Act. The law makers have made a comprehensive provision for advance rulings under GST to ensure that disputes are minimal keeping in mind four broad objective namely

  • to provide certainty in tax liability in advance,
  • attract Foreign Direct Investment (FDI),
  • reduce litigation and
  • pronounce ruling expeditiously in transparent and inexpensive manner

What is Advance Ruling as per GST Law

Advance ruling means a decision provided

  • by the Authority [i.e. Authority for Advance Ruling (AAR)] or
  • the Appellate Authority [i.e. Appellate Authority for Advance Ruling (AAAR)]

to an applicant on matters or on questions specified under Section 97(2) or Section 100(1) of the Central Goods and Service Tax Act, 2017 in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant.

Thus, Advance ruling under GST can be obtained for a proposed transaction as well as a transaction being undertaken by the appellant. However, the question being raised should not be already pending or decided in any proceedings in the case of applicant.

Further, any person registered under the GST Act or desirous of obtaining registration can sought advance ruling.

At this point it is pertinent to understand that advance ruling cannot be sought for any matter or by anyone.

What are the matters/ questions for which advance ruling can be sought

The law has specifically laid down the matters/ questions in respect of which advance ruling can be sought. Section 97(2) and Section 100(1) of the CGST Act, 2017 provides for such matters/ questions namely:-

  1. Classification of any goods or services or both;
  2. Applicability of a notification issued under the provisions of CGST Act;
  3. Determination of time and value of supply of goods or services or both;
  4. Admissibility of input tax credit of tax paid or deemed to have been 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 any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term.


The first and foremost thing the applicant should identify is whether the issue sought for advance ruling falls under Section 97(2) or Section 100(1) of the Act (ibid) as mentioned above or not. In case the issue sought for advance ruling is other than the matters mentioned above, the application will be subject to rejection by advance ruling authority. Thus, in such cases, the applicant should not file for advance ruling as it will be absolute waste of efforts, time and recourses of not only the applicant but also the government authorities without any constructive result.

Issues sought for advance ruling by the applicant which have been rejected

S. No.IssueRelevant AAR/ AAARReason for Rejection
1.Provisions related to e-way billTamil Naidu Edibile Oil (2019) [AAR-Tamil Nadu] dated 21st May 2019The issue for which advance ruling is sought depends upon the provisions of e-way bill which does not fall within the ambit of the Authority. 
2.Past period activityShyam Singh Champawat (RAJASTHAN) RAJ/AAR/2018-19/33 dated 31st Jan 2019Questions related to activity undertaken in past period are not eligible for advance Ruling. Only matters which are either being undertaken or is proposed to be undertaken are qualified for advance ruling 
3.Applicant is other than supplier or recipient of goods/ services OR Application is not related to supplies made by applicantMobile Wallet (P) Ltd. [2019] [AAR MAHARASTRA] dated 16th Jan 2019   Applicant is neither supplier nor recipient and the question raised is not in relation to supply of goods or services or both being undertaken or proposed to be undertaken by the applicant, thus application was rejected.  
Technip UK Ltd [2019] [AAR MAHARASHTRA] dated 29th Jan 2019The application filed by the applicant was treated as infructuous as Applicant cannot obtain advance ruling for which he is not required to supply goods/ services. 
Barbeque Nation Hospitality Ltd [2019] [AAR WEST BENGAL] dated 29th Nov 2019Applicants question is not related to supplies the applicant makes or intends to make, therefore authority cannot provide decision and rejects the application
4.Non-payment of entire fees for advance rulingKreations Builders & Developers [2019] [AAR-MAHARASTRA] dated 23rd Jan 2019It is mandatory to pay applicable fees under CGST Act and SGST Act. Failure to do so, application will be considered as incomplete and liable to rejection. 
5.Matters involving procedural aspects such as such asWhether rectification regarding past invoices can be done by December 2018?  What rate of exchange it should consider for its billing in foreign exchange?Odyssey Tours & Travels [2019] [AAR GOA] dated 22nd Jan 2019Procedural Issue not covered under the mandate of the Authority. 
6.Requisite documents are not furnishedION Trading India Pvt Ltd [2020][AAR UTTAR PRADESH] dated 27th Sept 2019In the absence of requisite documents relevant for the case, no ruling can be given on the questions asked by the applicant. 
7.Determination of Export of service - Questions on determination of place of supplyBanyan Tree Advisors (P) Ltd. [2019] [AAR-KARNATAKA] dated 12th Sept 2019The applicant question related to place of supply and it is not a matter on which authority is empowered to give advance ruling.


To whom Advance Ruling is binding

The ruling given by the Authority for Advance Ruling is binding on the applicant as well as on the concerned/ jurisdictional officer in respect of the applicant.

It is to be noted that advance ruling is only applicable to the person who has applied for an advance ruling. However, 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.

Whether appeal can be filed against the decision of Advance Ruling

The GST law provides that in case the concerned/ jurisdictional officer or applicant is aggrieved by any advance ruling pronounced by the Authority for Advance Ruling, they may appeal to the Appellate Authority.

The decision of the Appellate authority is also treated as an advance ruling.

Conclusion

Seeking an advance ruling is inexpensive and the procedure is simple and expeditious as the ruling is pronounced within ninety days of the application. Moreover, it provides certainty and transparency to a taxpayer with respect to an issue which may potentially cause a dispute with the tax administration in future.

It is thus constantly recommended that the applicant must sought for advance ruling to plan in advance in case the matter is complex and involve high stake.

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