Public sector companies can now seek advance ruling on Customs, Central Excise and Service Tax matters. Also, Indian companies (those considered as resident under the Income-Tax law) have now been allowed to seek advance ruling on project imports.

The Center’s move to extend the advance ruling facility to public sector companies comes nearly a decade after the concept was introduced for foreign investors in respect of central excise and customs duty. The advance ruling scheme was introduced for customs and central excise in 1999 and later expanded in 2003 to include service tax

The scheme assured foreign investors in advance about their likely indirect tax liability. As the advance rulings are binding on both the applicant and the Revenue department, the possibility of disputes and litigation subsequently are almost nil, say tax experts.

Till date, the advance ruling facility was available only for a non-resident setting up joint venture in India; or a resident setting up a joint venture in India in collaboration with a non-resident; or a wholly-owned subsidiary Indian company, of which the holding company was a foreign company.

The Standing Committee on Finance had suggested that the PSUs should be allowed to avail themselves of the advance ruling facility. A committee constituted by CBEC had also suggested that this facility be given to PSUs as they were already getting this benefit for direct taxes.

An advance ruling assures the applicant of the finality of the tax liability and hence frees up time, energy and money taken up by legal battles which mostly become long-drawn.

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