Chapter XVII of the CGST Act containing sections from 95 to 106 is pertaining to Advance Ruling. Rules from 103 to 107A in regard to Advance Ruling have been specified in chapter XII of the CGST Rules.
Definition – Section 95(a)
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.
Benefits of the Advance Ruling
> Section 103(1) – The Advance Ruling shall be biding on the applicant as well as on the concerned officer or the jurisdictional officer in respect of the applicant.
> An 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.
> It helps in avoiding long drawn and expensive litigation at a later date.
> Seeking an advance ruling is inexpensive and the procedure is simple and expeditious. It thus provides certainty and transparency to a taxpayer with respect to an issue which may potentially cause a dispute with the tax administration.
Only specified matters/questions stated under section 97(2) and 100(1) shall be sought for advance ruling.
Section 97(2) –
a. classification of any goods or services or both;
b. applicability of a notification issued under the provisions of this 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 100(1) – This section provides that the concerned officer, the jurisdictional officer or an applicant aggrieved by any advance ruling pronounced by the Authority for Advance Ruling, may appeal to the Appellate Authority.
Thus, it can be seen that a decision of the Appellate authority is also treated as an advance ruling.
Conditions for filing Advance Ruling Application
> Any person registered or desirous of obtaining registration under this Act can file the application for Advance Ruling.
> Application shall be in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant.
> Application shall be in relation to matters or questions specified under section 97(2).
> The question raised in the application is not already pending or decided in any proceedings in the case of an applicant under any of the provisions of this Act.
Case Laws
Case Law – The Recipient filed an application for Advance Ruling on the matter of inward supply – M/s SURAT MUNICIPAL CORPORATION (SMC) (2022-VIL-25-AAAR) – Gujrat Appellate Authority for Advance Ruling.
The Appellant filed an application for advance ruling in respect to classification of inward supply of certain service. The Appellant has mainly stressed on the definition of “applicant” given under Section 95(c) of the CGST Act, 2017, according to which “applicant” means any person registered or desirous of obtaining registration under this Act.
Grounds rejecting the recipient to file Advance Ruling Application – The impugned transaction are not in relation to the supply of goods or services or both undertaken or proposed to be undertaken by the appellant and therefore, we are of the view, that it is outside the purview of mandate given to the Advance Ruling Authority/ Appellate Authority on Advance Ruling. The provisions of Section 103 states that the ruling pronounced is binding only on the applicant. It is amply clears that if a recipient of supply obtains a ruling on the taxability of his inward supply of goods or services or both, the supplier of such goods or services or both is not bound by that ruling and he is free to assess the supply according to his own determination/understanding of law and hence ruling loses its relevance and applicability. Any provision of law has to be interpreted in a constructive and harmonious way keeping in mind the object of the purpose of the provision. Any interpretation, if it defeats the vary purpose of the provision of law is not only incorrect but also improper and bad in law.
Case Law – The Recipient filed an application for Advance Ruling whether tax is payable under reverse charge mechanism (RCM) – M/S Portescap India Private Limited – MAH/AAAR/RK-SK/27/2020-21 dated 03.11.2020 – Maharashtra Appellate Authority for Advance Ruling
The MAAR observed in this case that the Appellant is not undertaking the impugned supply, rather they are the recipient of the impugned supply i.e. “renting of immovable property services” and therefore, the impugned transaction is not in relation to the supply of goods or services or both undertaken or proposed to be undertaken by the Appellant, and thereby has rejected the Advance Ruling application in terms of provision of section 95(a) of the CGST Act.
The only moot issue before the AAAR is whether the Advance Ruling application is maintainable in terms of section 95(a) read with section 97(2) of the CGST Act to determine the liability of tax on the basis of reverse charge mechanism (RCM)
The AAAR held that under section 9(3) CGST Act the tax shall be paid on reverse charge basis by the recipient. Though the recipient is not a supplier, as per deeming fiction in the section, if he is covered by the notification issued under section 9(3) of the CGST Act, he does become liable to pay tax and more importantly, all the provisions of this Act applicable to him. Therefore, provisions related to the Advance Ruling will be applicable to such recipients. Tax Invoice is to be issued by such recipient. Such recipient avails ITC on the basis of such issued Tax Invoice. This makes it clear that the recipient deemed to be liable to pay tax, he is well within his rights to make an application for Advance Ruling to know whether he is liable to pay tax.
Case Law – Advance Ruling for “whether the supply made by the petitioner would qualify as export of service” as defined in Sec. 2(6) of the IGST, 2017 – SUTHERLAND MORTGAGE SERVICES INC – 2020-VIL-102-KER – HIGH COURT OF KERALA
In the case the Advance Ruling Authority has proceeded to hold that the issue to be determined is one relating to the place of supply of service. The “place of supply of service” cannot be the subject matter of advance ruling in terms of Sec. 97 of the CGST Act, etc. for the simple reason that the determination of the issue of place of supply, is not enumerated in Sec. 97(2) and on this premise, the Advance Ruling Authority has chosen to reject application given by the petitioner at the threshold stage in terms of Sec. 98(2) of the CGST Act.
The Hon’ble High Court held that it is true that the issue relating to determination of place supply as afore-stated is not expressly enumerated in any of the clauses as per clauses (a) to (g) of Sec. 97(2) of the CGST Act but this issue (determination of place of supply) would come within the ambit of the larger of issue of “determination of liability to pay tax on any goods or services or both” as envisaged in clause (e) of Sec. 97(2) of the CGST Act. The Advance Ruling Authority has proceeded on a tangent and has missed the said crucial aspect of the matter and has taken a very hyper technical view that it does not have jurisdiction for the simple reason that the said issue is not expressly enumerated in Sec. 97(2) of the Act. This Court has no hesitation to hold that the said view taken by the Advance Ruling Authority is legally wrong and faulty and therefore the matter requires interdiction in judicial review in the instant writ proceedings. In that view of the matter, it is ordered that the abovesaid view taken by the Advance Ruling Authority is legally wrong and faulty and is liable to be quashed and accordingly declared and ordered.
Case Law – On the matter of “being undertaken” stated under section 95 – M/s SHRI VINAYAK BUILDCON – 2022-VIL-47-AAAR – RAJASTHAN APPELLATE AUTHORITY FOR ADVANCE RULING
The applicant filed an application for advance ruling on dated 06-07-2021 relating to supply of services made during the period from 01-04-2019 to 31-03-2021. The AAR rejected the application on the ground that the application filed related to supplies prior to the date of filing of application. The scope of the advance ruling for the Authority for Advance Ruling is limited to the transactions being undertaken or proposed to be undertaken.
The Appellate Authority held that Section 95 of the CGST Act, 2017, in clause (a), clearly defines advance ruling as a decision on the specified matters or questions in relation to supply of services being undertaken or proposed to be undertaken by the applicant. We find that while supply of services ‘proposed to be undertaken’ is clearly a matter of supply which will be undertaken in future and which, at present, is at proposal stage only, supply of services ‘being undertaken’ is a matter of supply in the present which has moved beyond the stage of proposal towards the execution stage. But in any case, the phrase ‘being undertaken’ does not cover in its ambit anything which has been completed or which has become the thing of the past as clause (a) does not use the word ‘undertaken’ singly. This is the only interpretation of the phrase ‘being undertaken’ that is commensurate with the intrinsic meaning of the word ‘advance’ in ‘advance ruling’ which simply denotes that an applicant can obtain a ruling in advance from the specified authority.
Thus, the definition of advance ruling does not permit for making of an application in relation to the supply of services already undertaken for a long period of two years in pursuance of an agreement which had expired long before the making of the application seeking advance ruling.
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