All about Advance Ruling under GST i.e. Section 95 to Section 106 of the CGST Act, 2017

Article explains Basic understanding of Advance Ruling, The broad objectives for setting up a mechanism of Advance Ruling, Applicability of Advance Ruling, Authority for Advance Ruling (AAR) & Appellate Authority for Advance Ruing (AAAR), Questions for Advance Ruling can be sought, Procedure for Advance Ruling, Appeals against order of AAR to AAAR, Rectification of Mistake, Advance Ruling void in certain circumstance, Power and Procedure of AAR & AAAR and Important Notes.

Very Simple analysis of Advance Ruling is as under:-

1) Basic understanding of Advance Ruling

All About Advance Ruling Authority Under GSTAn advance ruling helps the applicant in planning his activities which are liable for payment of GST, well in advance. It also brings certainty in determining the tax liability, as the ruling given by the Authority for Advance Ruling is binding on the applicant as well as concerned Government authorities.

It thus provides certainty and transparency to a taxpayer with respect to an issue which may potentially cause a dispute with the tax administration.

A legally constituted body called Authority for Advance Ruling (AAR) can give a binding ruling to an applicant who is a registered taxable person or is desirous to be registered.

2) The broad objectives for setting up a mechanism of Advance Ruling

  • provide certainty in tax liability in advance in relation to an activity proposed to be undertaken by the applicant;
  • attract Foreign Direct Investment (FDI) by ensuring certainty in taxation aspects of transactions
  • reduce litigation
  • pronounce ruling expeditiously in a transparent and inexpensive manner

3) Applicability of Advance Ruling (Section 103)

An advance ruling pronounced by AAR or AAAR shall be binding only on

– the applicant and on the concerned officer or

– the jurisdictional officer in respect of the applicant.

This clearly means that an advance ruling is not applicable to similarly placed other taxable persons in the State. It is only limited to the person who has applied for an advance ruling.

The law does not provide for a fixed time period for which the ruling shall apply. Instead, it has been provided that advance ruling shall be binding till the period when the law, facts or circumstances supporting the original advance ruling have not changed.

4) Authority for Advance Ruling (AAR) & Appellate Authority for Advance Ruing (AAAR) (Section 96 & Section 99)

  • The AAR & AAAR ruling constituted under the provisions of State Goods and Services Tax Act or Union Territory Goods and Services Tax Act shall be deemed to be the AAR & AAAR in respect of that State or Union territory under the CGST Act, 2017 also.
  • The Government shall appoint officers not below the rank of Joint Commissioner as member of the Authority for Advance Ruling.
  • Thus it can be seen that both AAR & AAAR is constituted under the respective State/Union Territory Act and not the Central Act. This would mean that the ruling given by the AAR & AAAR will be applicable only within the jurisdiction of the concerned state or union territory.
  • It is also for this reason that questions on determination of place of supply cannot be raised with the AAR or AAAR.

5) Questions for Advance Ruling can be sought (Section 97)

Advance Ruling can be sought for the following questions:-

  • classification of any goods or services or both
  • applicability of a notification issued under the provisions of CGST Act
  • determination of time and value of supply of goods or services or both
  • admissibility of input tax credit of tax paid or deemed to have been paid
  • determination of the liability to pay tax on any goods or services or both
  • whether applicant is required to be registered
  • 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

6) Procedure for Advance Ruling (Section 98)

a) Application

  • The applicant desirous of obtaining advance ruling should make application to AAR in a prescribed form and manner and shall be accompanied by a fee of Rs. 5000.

b) Call for Information from concerned officer

  • Upon receipt of an application, the AAR shall send a copy of application to the concerned officer and, if necessary, call for all relevant records from the concerned officer. The relevant records called for by AAR shall be returned to the Concerned officer, as soon as possible.

c) Acceptance or Rejection of Application

  • The AAR may then examine the application along with the records and may also hear the Thereafter he will pass an order either admitting or rejecting the application.
  • Application for advance ruling will not be admitted in cases where the question raised in the application is already pending or decided in any proceedings in the case of an applicant under any of the provisions of this Act.
  • If the application is rejected, it should be by way of a speaking order giving the reasons for rejection.

d) Order of Ruling

  • If the application is admitted, the AAR shall pronounce its ruling within 90 days of receipt of Before giving its ruling, it shall examine the application and any further material furnished by the applicant or by the concerned departmental officer.
  • Before giving the ruling, AAR must hear the applicant or his authorized representative as well as the jurisdictional officers of CGST/SGST.

e) Difference of opinion between members of AAR

  • If there is a difference of opinion between the two members of AAR, they shall refer the point or points on which they differ to the AAAR for hearing the issue. If the members of AAAR are also unable to come to a common conclusion in regard to the point(s) referred to them by AAR, then it shall be deemed that no advance ruling can be given in respect of the question on which difference persists at the level of AAAR.

A copy of the advance ruling duly signed by members and certified in prescribed manner shall be sent to the applicant, the concerned officer and the jurisdictional officer.

7) Appeals against order of AAR to AAAR (Section 100 read with Section 101)

a) Appeal to AAAR

  • If the applicant is aggrieved with the finding of the AAR, he can file an appeal with AAAR. Similarly, if the concerned or jurisdictional officer of CGST/SGST does not agree with the finding of AAR, he can also file an appeal with AAAR.
  • In normal circumstances, the concerned officer will be the officer in whose jurisdiction the applicant is Thus, it can be seen that a decision of the Appellate authority is also treated as an advance ruling.

b) Time Limit for Appeal

  • Any appeal must be filed within 30 days from the receipt of the advance The Appellate Authority may allow for an additional 30 days for filing an appeal, if it is satisfied that there was a sufficient cause for delay in presenting the appeal.

c) Application for Appeal with prescribed fees

  • The appeal has to be in the prescribed form and has to be verified in the prescribed An appeal has to be filed by the applicant along with fee of Rs. 10,000. However, if the concerned officer or jurisdictional officer is aggrieved by the decision of AAR, then no fee is required to be paid.

d) Order of AAAR

  • The Appellate Authority must pass an order after hearing the parties to the appeal within a period of 90 days of the filing of an appeal.

e) Difference of opinion between members of AAAR

  • If members of AAAR differ on any point referred to in appeal, it shall be deemed that no advance ruling is issued in respect of the question under appeal.
  • The said authority can either confirm or modify the ruling appealed against.

A copy of the advance ruling pronounced by the Appellate Authority should be signed by the members, certified in the prescribed manner, and communicated to the applicant, the concerned officer, the jurisdictional officers and to the authority.

8) Rectification of Mistake (Section 102)

  • The law gives power to AAR and AAAR to amend their order to rectify any mistake apparent from the record within a period of 6 months from the date of the order.
  • Such mistake may be noticed by the authority on its own accord or may be brought to its notice by the applicant or the concerned or the jurisdictional officer.
  • If a rectification has the effect of enhancing the tax liability or reducing the quantum of input tax credit, the applicant must be heard before the order is passed.

9) Advance Ruling void in certain circumstance (Section 104)

  • If the Authorities (AAR and Appellate Authority) find that the advance ruling pronounced has been obtained by the applicant/appellant by fraud or suppression of material facts or misrepresentation of facts, it may, by order, declare such ruling to be void ab-initio.
  • Consequently, all the provisions of the CGST Act shall apply to the applicant as if such advance ruling had never been made (but excluding the period when advance ruling was given and up to the period when the order declaring it to be void is issued).
  • An order declaring advance ruling to be void can be passed only after hearing the applicant/ appellant.
  • A copy of the order so made shall be sent to the applicant, the concerned officers and the jurisdictional officer.

10) Power and Procedure of AAR & AAAR (Section 105 read with Section 106)

  • Both the AAR and AAAR are vested with the powers of a civil court under Code of Civil Procedure, 1908, for discovery and inspection, enforcing the attendance of a person and examining him on oath, issuing commissions and compelling production of books of account and other records.
  • Both the authorities are deemed to be a civil court for the purposes of section 195 of the Code of Criminal Procedure, 1973.
  • Any proceeding before the authority shall be deemed to be judicial proceeding under section 193 and 228 and for the purpose of section 196, of the Indian Penal Code, 1860. The AAR and AAAR also have the power to regulate their own procedure.

11) Important Notes

a) Advance ruling

Advance Ruling means a decision provided by the Authority or the 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, in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant.

b) Matters which cannot be questioned before AAR are :-

  • Question already pending in any proceedings in the case of applicant
  • Question already decided in any proceedings in the case of an applicant

c) Section 95 : Section 95 is all about relevant Definitions.

d) Prescribed Fees : Fees prescribed for application to AAR & AAAR shall apply for each tax head separately and not cumulatively.

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February 2021