Vipin Kumar Khatri
The World of Business is based on informed decisions. Decisions which make or break an organisation. A right estimation may lead it to scale new heights, and on the other hand, a wrong cost projections may lead to complete wipeout of the business.
Ambiguities in Law
Any Law, no matter how beautifully drafted, is incapable to deal with every single transaction happening in its jurisdiction. The same could be the case with GST Law in India. As a result there may remain ambiguities in the minds of dealers as to:
- What tax rate to charge on their product?
- How and Where should his goods be classified?
- Whether any given notification is applicable to him?
- How to determine the time and value of supply of goods or services or both?
- Whether input tax credit of tax paid or deemed to have been paid, is admissible?
- How to determine the liability to pay tax on any goods or services or both?
- Whether he is required to be registered?
- Whether any particular thing done by him 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?
To ward off against such situations and problems the concept of Advance Ruling has been laid under Chapter XVII of the Central Goods and Service Tax Act, 2017. This chapter covers a total of 12 sections ranging from section 95 to section 106.
Advance ruling is defined under Section 95(A) as a decision provided by the Authority or the Appellate Authority to an applicant on matters or on questions in relation to the supply of goods and/or services being undertaken or proposed to be undertaken by the applicant. Thus the purpose of forming an authority on advance ruling is to provide clarity on many unanswered questions of law which arise due to various anomalies in law. It also help business and investors to work out the tax component on their future proposed project before any major investment is made. As it helps the public by providing clarity of law, the resultant is lower litigations by revenue authority as decisions of Advance Ruling Authority are binding on them and the applicant also.
Constitution :
The constitution of Advance Ruling Authority has been specified under section 96(2) of the State Goods and Services Tax Act,2017. It would consist of one member of the Central Tax and one member from the State Tax which shall be appointed by the Central and State Government respectively.
The Appellate Authority on the other hand has been specified under section 99(2) of the State Goods and Services Tax Act,2017. It would consist of the Chief Commissioner of Central Tax as designated by the board; and the Commissioner of State Tax having jurisdiction over the applicant.
Questions that may be raised
Section 97(B) specifies the categories of questions which can be asked from the authority of advances ruling by making an application in the form and manner prescribed, along with the prescribed fee for the questions that may be asked from it. These questions have been specified above.
Under the ideal situation these questions should have been answered in law itself for every business and every situation. But how is it possible to imagine all possible situations while drafting the law. So there remain various deficiencies which result in numerous litigations. Thus Advance ruling acts as a law clarifying authority. And a well directed and properly drafted question asked from authority of advances ruling may save number of years of litigation with the GST Department.
Procedure of Advance Ruling : –
Section 98(c) describes the procedure on advance ruling authority on receipt of an application seeking advances ruling. On receipt of such application the authority shall send a copy of it to the officer concerned and call upon him to furnish the relevant records. The authority then will examine the application and such records and hear the applicant and the concerned officer through their authorized representative or in person. An order will then be passed either admitting or rejecting the application. No such application is admitted which has a questions similar to any previously decided or pending questions. If the authority wishes to reject on application, it can do so only after providing on opportunity of being heard to the applicant and also the order thus made should provide the reason for rejections.
A copy of above order shall be sent to the applicant and concerned officer.
After the authority has admitted the application, it shall examine any further material placed before it or obtained by it and provide an opportunity of being heard to the applicant or his A.R. as well as to the concerned officer. There after the authority shall pronounce its advance ruling on the question specified in the application. Time limit for disposal of application is 90 days of receipt of application. A certified and signed copy of ruling shall be send to Applicant and Concerned officer and jurisdictional officer.
Difference of opinion amongst members
Where the members of the authority differ on any question they shall mention the points(s) on which they differ and refer to the appellate authority for hearing and decision thereon.
Appellate Authority for Advance Ruling (S.99)
Any Appellate Authority constituted under any State or Union Territory G.S.T Act shall be deemed to have jurisdiction over that State or UT only.
A Certified and Signed copy of ruling shall be sent to
– The Applicant,
– Concerned Officer and
– Jurisdictional O
Appeal to the appellate Authority (S.100)
An appeal against the advance ruling prescribed u/s 98(4) may be filed within 30 days of receipt of ruling by the aggrieved party.
This period may be extended by another 30 days if sufficient cause is disclosed by the appellant before the authority.
| Time Limit : | 30 days of receipt of appeal |
| Condonation of delay : | 30 days if sufficient cause |
| Fee : | Rs.10000 |
| Who can appeal : | Applicant, Concerned officer, Jurisdictional officer. |
Orders of Appellate Authority (S.101)
An appellate authority shall pass such order as it may deem fit either confirming or modifying the ruling made u/s 98(6) or reference u/s 98(5). But only after giving the parties to the appeal or reference an opportunity of being heard.
No Advance Ruling can be issued if members of the appellate authority differ on any points referred to in an appeal or reference. In such a case a deadlock situation may arise and the applicant may feel that his time has been wasted. However such situations shall be useful for government to draft or amend the provision of law in such a manner as to take care of ambiguities in law avoiding such deadlock scenarios.
After the authority has admitted the application, it may examine any further material placed before it or obtained by it and provide an opportunity of being heard to the applicant or his A.R. as well as to the concerned officer. Thereafter the authority shall pronounce its advance ruling on the question specified in the application.
A Certified and Signed copy of ruling shall be sent to
– The Applicant,
– Concerned Officer,
– Jurisdictional Officer and
– The Authority.
Rectification of advance ruling (S.102) can be made by the authority u/s 98 and by the appellate authority u/s 101 of any mistake apparent from record within a period of 6 months from the date of the order. However proper opportunity of being heard is to be provided to the applicant if such rectification would result in enhancing the tax liability or reducing the input tax credit.
Advance ruling shall be Binding on
(1) Applicant
(2) Concerned officer or jurisdictional officer.
And it shall be binding unto the time the law facts or circumstances remain the same i.e. if the applicant obtains an advance ruling and before he applies the ruling for his business the facts change like say the raw material which was earlier imported is now sourced from India itself. Now the jurisdictional officer may refuse to accept the ruling citing change in facts of the case.
If the authority or the appellate authority finds that the applicant has obtained the advance ruling by fraud or suppression of material facts or mis-representation of facts, it may pass an order declaring such ruling as void ab initio i.e. it shall be deemed to never have been made. This order shall be passed only after providing an opportunity of being heard to the applicant.
And for making any recoveries u/s 73 or 74 the period between date of such advance ruling and date of order shall be excluded.
Powers : Authority or Appellate Authority shall have all the powers of civil court under the Code of Civil Procedure, 1908 regarding discovery and inspection, enforcing the attendance of any person and examining him on oath or for issuing commissions and compelling production of books of account and other records.
Similar provisions Taxation laws have traditionally provided provisions of advance ruling for the benefit of public, to facilitate foreign investment into the country and to safeguard against harassment due to unclear Law. Some statutes however call these provisions as determination or clarification. Given below is the comparison chart of similar provisions of advance ruling under exixting laws with GST laws.
Comparison Chart of Advance Ruling Provisions of various tax Laws:
| Income Tax | Excise, Customs, Service Tax | DVAT | GST | |
| Acts | Income-tax Act, 1961 | Customs Act, 1962 | Dvat Act,2004 | Central GST Act,2017 |
| Sections | 245N(a) | Sec. 28F | Section 84 & 85 | Sec.95 to 106 |
| Fees | Rs.10,000 to Rs.10 Lakhs | Rs.2,500 | NA | Rs.5,000 |
| Disposal time | 6 months | 90 days | As Prescribed in 84(5) | 90 days |
| Form | Form 34C/D/DA/E/EA | Excise : AAR CE-1
Customs : AAR CUS-1 Service Tax : AAR ST-1 |
DVAT-42 | FORM GST ARA-1 and ARA-2 |
| Questions that may be asked | questions of law or fact pertaining to the income tax liability of the non resident, clarification for double tax agreements, | Classification, valuation, Applicability of notifications, Admissibility of input-tax credit, Determination of the tax liability | whether any person would be a dealer, required to be registered, a transaction is or would be a sale, works contract, a sale is/not liable to tax or is exempt, tax credit, import of goods, value of any goods imported into Delhi, determination of taxable turnover, sale price, the rate of tax, purchase of goods, the location of any sale or purchase, application of a composition scheme. | Determination of tax rate, time and value of supply, classification, applicability of notifications, admissibility of Input tax credit, requirement for registration |
| Authority | Authority for Advance Ruling | Authority for Advance Rulings, Central Excise, Customs & Service Tax | Commissioner | Authority for advance ruling |
| First Appellate Authority | ITAT | CESTAT | Tribunal | Appellate Authority for advance ruling |
| Ruling binding on | department and the applicant in relation to the said transaction | department assessing officer and the applicant | On the particular transaction | Applicant, revenue authorities. |
| Who can seek AR | Resident dealing with NR, NR, resident undertaking transaction(s) more than Rs.100 cr., notified public sector co., other prescribed | Non resident setting JV in India, Subsidiary of foreign co., Resident Company or Firm, other specified persons | Any person | Any person |
| Constitution | Independent Body headed by Ex-judge of SC and two members of the rank of Additional Secretary to the Government of India. | a retired SC Judge, a customs & Excise officer qualified as board Member, a Indian Legal Service officer qualified as Addl. Secretary to Indian Gov. | Commissioner of VAT | Joint Commissioner (3 Yr. experience) |
What is Invoice Format Under GST?
Conclusion:
The concept of Advance Ruling as explained above is most beneficial for emerging and new businesses, where due to the ironies of law, it may take wrong decisions which may jeopardise the existence itself.
