The introduction of Goods and Services Tax (GST) has fundamentally changed India’s indirect taxation system. Previously, multiple indirect taxes applied across India, but GST has unified these into a single tax structure, revolutionizing the way we look at indirect taxes. One of the intriguing features of GST is the provision for advance rulings. The mechanism is designed to eliminate ambiguities in tax liabilities concerning specific transactions, aiming to bring about clarity and reduce litigation. This article delves deep into the nitty-gritty of advance rulings under the GST law and how they have impacted businesses in both favorable and unfavorable ways.
The provisions of Goods and Services Tax law have introduced significant changes in the way indirect tax system used to operate in the earlier regime. Once upon a time there used to be multiple indirect taxes applicable across our country ‘Bharat’, but now there is single indirect tax (for domestic transactions) for the entire nation which is a remarkable step of the Government towards unification of once distributed industry into single market.
The provisions of GST levy and the way credit is to be availed/ distributed, has ensured that there is (i) destination-based tax levy (ii) no cascading of taxes except on luxuries or demerit items or personal effects and (iii) seamless flow of input tax credit with few exceptions.
Six years have passed since the roll out of the GST law and being a new & consolidated law for goods and services, there have been difficulties in interpreting the provisions of law. Moreover, substantive changes have been made by the Government in the act, rules, and notifications from time to time for the improvement of this new law with an intent to benefit the taxpayers.
Given the pace at which changes are introduced by the Government in the GST law, there have been confusion across the industry in applicability of provisions, notifications etc. To rule out this confusion, the Government has been issuing circulars in a timely manner.
In spite of the above efforts, still the ambiguity remains on matters related to GST on various transactions. Since the cost of transactions involved is quite high and the GST exposure on the same, is also substantial which may impact the going concern of the business entity in some cases, if not taken care of properly. Accordingly, Government has introduced the advance ruling mechanism under the GST law. Advance ruling mechanism is not a new concept introduced under GST and was applicable in the earlier regime as well.
Taxpayers have been using advance ruling mechanism to obtain certainty in tax liability in advance in relation to any activity/ supply proposed to be undertaken. It helps reduce litigation and bring certainty and transparency in taxation of transactions.
This article is an attempt to explain regarding the provisions relating to advance ruling under the GST law and key recent advance rulings which have impacted the businesses both in positive and negative manner.
Provisions relating to advance ruling
Q.1 What is an advance ruling?
Advance ruling means a decision provided by the Authority or the Appellate Authority or the National Appellate Authority to an applicant on matters or on questions specified in sub-section (2) of section 97 or sub-section (1) of section 100 or of section 101C, in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant. – Section 95(a) of CGST Act
Q.2 What are the matters on which advance ruling can be obtained by an applicant?
a. classification of any goods or services or both
b. applicability of a notification issued under the provisions of the CGST Act
c. determination of time and value of supply of goods or services or both
d. admissibility of input tax credit of tax paid or deemed to have been paid
e. determination of the liability to pay tax on any goods or services or both
f. whether applicant is required to be registered
g. 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
– Section 97 of CGST Act
Q.3 Who can apply for advance ruling?
Any person registered or desirous of obtaining registration under the CGST Act. – Section 95(c) of CGST Act
Q.4 What is the time limit within which advance ruling needs to be pronounced by the authority?
Within 90 days from the date of receipt of application. – Section 98(6) of CGST Act
Q.5 What is the brief process for obtaining an advance ruling?
An applicant desirous of obtaining an advance ruling should make an application on the GST common
portal in Form GST ARA 01 along with relevant documents on payment of fees of INR 5,000.
Upon receipt and examination of the application, the authority should either accept or reject the same. Once an application has been admitted, the authority shall, after examining material and other documents pronounce its advance ruling on the question specified in the application. – Section 97 & 98 of CGST Act
Q.6 What is the remedy available in case the advance ruling is pronounced against the applicant/ officer?
An aggrieved party may appeal in Form GST ARA 02 or Form GST ARA 03, as the case may be, to the Appellate authority within 30 days from the date of receipt of advance ruling to be appealed. The appeal should be made on the GST common portal on payment of fees of INR 10,000. However, in case the appeal is filed by the officer, then no fees are applicable. – Section 100 of CGST Act
Q.7 What is the time limit within which order of appellate authority is to be pronounced?
Appellate authority should pronounce the order within 90 days from the date of filing of appeal. – Section 101(2) of CGST Act
Q.8 When can an appeal be filed before the National Appellate Authority?
Where conflicting advance rulings are given by the appellate authorities of 2 or more states/ UTs, then any officer authorised by the Commissioner or an applicant, being a distinct person aggrieved by such advance rulings may prefer an appeal to National Appellate Authority within 30 days/ 90 days, as the case may be. – Section 101A of CGST Act
Q.9 What is the time limit within which order of national appellate authority is to be pronounced?
National Appellate authority should pronounce the order within 90 days from the date of filing of appeal. – Section 101C (3) of CGST Act
Q.10 Who shall be obligated by the advance ruling pronounced by authority or appellate authority?
The advance ruling should be binging only on the applicant who has sought the same and on the concerned officer/ jurisdictional officer of the applicant. – Section 103(1) of CGST Act
Q.11 Till when the advance ruling should remain binding.
The advance ruling shall be binding without any time limitation unless the law, facts or circumstances
supporting the original advance ruling have changed. – Section 103(2) of CGST Act
Q.12 When can an advance ruling be declared void?
In case the same has been obtained by the applicant or the appellant by fraud or suppression of material facts or misrepresentation of facts, the authority/ appellate authority or national appellate authority may, by order, declare such ruling to be void ab-initio. – Section 104 of CGST Act
Gist of few recent advance rulings
We have provided below the gist of recent advance rulings pronounced by the advance ruling authority/ appellate authority dealing with key matters relating to GST law.
| Case law | Question involved | Order pronounced | Final order (Favour or Against) |
| AAAR Maharashtra – Puranik Builders Ltd. | Whether the other Charges received by the company will be treated as consideration for construction services of the Company and classified under HSN 9954 along with the main residential construction services of the Company or whether the same will be treated as consideration for independent service(s) of the respective head? | Other charges which are inextricably linked to services by way of construction of residential apartment / dwellingare part of a bundled service with principal service of construction of residential apartment /dwelling. The rate of tax applicable on such services would be 12% as applicable to the construction service. The other charges that don’t pass the muster of indicators of a bundled service are held as supply of independent services. They are to be taxed as per the respective SAC codes and rate of tax thereon. |
Partly in favour of taxpayer, partly in favour of department |
| AAAR Tamil Nadu – Kothari Sugars and Chemical Limited | Whether recovery of nominal amount from the employees for making payment to the third-party service provider, providing food in canteen as mandated in the factories Act, 1948, would attract tax under GST? | AAAR uphold the following decision of AAR:
“The applicant has established canteen facilities as mandated under Section 46 of the Factories Act, 1948 and supplies food at a nominal cost either directly or through third party-vendor. ‘The supply of food by the applicant is Supply of service by the applicant to their employees as the same is not a part of the employment contract and the canteen facility is provided as mandated under factories Act. the nominal cost, which is recovered from the salary as deferred payment is ‘consideration’ for the supply and GST is liable to be paid.” |
Favour of department |
| AAAR West Bengal – KARNANI FNB SPECIALITIES LLP | Whether or not the applicant is obliged to reverse ITC under Section 17(2) of the CGST Act read with Rule 42 of the CGST Rules, in view of the sale of alcoholic liquor for human consumption effected by it at its premises under the facts and circumstances of the case? | Sale of alcoholic liquor for human consumption is a non- taxable supply under Section 2(78) of the GST Act, 2017 and subsequently is an exempt supply under Section 2(47) ibid. Therefore, the appellant is required to reverse input tax credit (ITC) in terms of sub-section (2) of section 17 ibid read with Rule 42 of the GST Rules, 2017 for sale of alcoholic liquor for human consumption. | Favour of department |
| AAAR Maharashtra – IVL INDIA ENVIRONMENTAL R AND D PVT LTD | Whether mere transfer of monetary proceeds by the IVL India Environmental R & D Pvt Ltd to IVL Swedish Environmental Research Institute Limited without underlying import of service will be liable for payment of IGST under reverse charge mechanism under entry no. 1 of Notification 10/ 2017 IGST (Rate) dated June 28, 2017? | It can be said that without the services of IVL Sweden, it would not have been possible for the Appellant to bag the contract from MCGM to carry out project management consultancy work. Thus, it can be safely concluded that the Appellant is availing support services from IVL Sweden to carry out the required PMC work as per the contract entered with MCGM. Accordingly, the service under question is import of services and the same will be liable for payment of IGST at the hands of the recipient of services in terms Entry 1 of the Notification No. 10/2017 -I.T.(Rate) dated 28.06.2017. | Favour of department |
| AAAR Punjab – Bansal Industries | Who shall be liable to pay tax through Reverse Charge Mechanism where the raw cotton is being supplied by the farmer through the Kacha Arhtiya to the appellant? |
Appellant is liable to pay GST under reverse charge basis being a registered person in terms of Notification no. 13/2017-CentraI Tax (Rate) dated 28th June, 2017 as amended vide notification no. 43/2017-Central Tax (Rate) dated 14th November, 2017 and not the Kacha Arhtiya. | Favour of department |
| AAR Karnataka – Isha Foundation | Whether the education being provided by the applicant is exempt under entry number 57 of Notification No. 9/2017 – Integrated Tax (Rate) dated 28th June 2017 or any other notification? | Applicant states that Isha Samskriti is a residential school with its own curriculum which is in line with Bhartiya tradition of gurukuls. The Applicant is neither providing pre-school education nor education up to higher secondary school and they are following their own curriculum. In view of the above the Applicant is not covered under the definition of educational institution as per NN 9/2017-Integrated Tax (Rate) and hence cannot claim exemption under this notification or any other notification. | Favour of department |
Conclusion: Upon perusal of the above, it can be inferred that the mechanism for advance ruling under GST law is systematic and robust. Although the rulings pronounced by different authorities on the same matter lack uniformity (on many occasions), however, still the rulings provide clarity on various aspects relating to GST law. Accordingly, it can be said that advance ruling mechanism is certainly a boon for the industry and taxpayers where favourable ruling is pronounced, whereas, the rulings where negative decision is pronounced, the taxpayers have an option to challenge the same.
(The views expressed above are entirely personal. In case of any query or feedback, please feel free to reach out at calakshitjindal@gmail.com.)
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very useful information, excellent!!!