Many individuals want to start a new business or retain the existing business in the market but they don’t know about their venture and its risks. The entrepreneur needs to get a clear knowledge about taxation matters before he decides to maintain. Clarity about the taxation matters for the business is a must. Otherwise, they may be exposed to certain unexpected events and risks which may have adverse consequences on their business.
Hence, To get a ride out from this matter and gain investor confidence, the clarification of certain tax matters a provision of the advance ruling was made in income tax in 1993 vide section 245N to 245R issued by the Authority for advance ruling (AAR). In income tax, the advance ruling is available in international taxation. Under GST, the advance ruling is a written decision by the tax authorities to an applicant on questions relating to the supply of goods/services.
What is Advance Ruling?
“Advance ruling” means a decision provided by the authority or the appellate authority to an applicant on matters or questions specified in sub-section(2) of section 97 or sub-section (1) of section 100 of the CGST Act, 2017 about the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant. An advance tax ruling is a written interpretation of tax laws. It is issued by tax authorities to corporations and individuals who request clarification of certain tax matters. Generally, Advance rulings can be given only for a proposed transaction. Due to some changes in the existing system advance ruling under GST can be obtained for a proposed transaction as well as a transaction already undertaken by the appellant.
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Why advance ruling under GST?
1. To provide clarity in a tax liability in advance about the applicant’s future activity.
2. Attract Foreign Direct Investment (FDI)- providing a clean and clear taxation system of the FDI, the clarity in taxation will attract non-resident so that they do not get involved in messy tax disputes.
3. Reduce litigation and costly legal disputes.
4. The opportunity of personal hearing can be granted to the applicant so, that the applicant can clear all his doubts transparently.
Who are applicable for the GST advance ruling and for whom?
An advance ruling is only applicable to the person who has applied for such advance ruling. Advance ruling can be applicable are as follow:-
1. Classification of any goods and services or both under the act.
2. Determination of time, value, and supply of goods and services.
3. Applicability of a notification that affects the tax rate.
4. Whether input tax credit of tax paid or deemed to be paid.
5. Whether the applicant is required to be registered.
6. Determination of the liability to pay tax on any goods or services or both.
7. Whether any particular transaction is a supply of goods or services or both.
What is the procedure for applying advance ruling?
1. The Applicants who want to obtain an advance ruling are required to apply Form GST ARA-01 with Fees of Rs.5000 each under the CGST & SGST act.
2. Then, AAR (Authority for Advance Ruling) may examine the application and the records and hear the applicant if required. However, it is up to the authority to decide whether to accept or reject the application.
3. The application for advance ruling, the verification contained therein and all relevant documents accompanying such application shall be signed.
4. In the case of an applicant under any of the provisions of this act, application of advance ruling will not be accepted, where the question raised in the application is already pending or decided in any proceedings.
5. If the application is accepted, the decision of authority shall be pronounced its advance ruling within 90 days from the date of receipt of the application.
6. If the application is rejected, an opportunity of hearing has been given to the applicant and by the way of speaking an applicant shall be specified the order of rejection.
7. A copy of the advance ruling duly signed by the members shall be sent to the applicant, the concerned officer & the jurisdictional officer.
Whether appeal against the decision of advance ruling?
1. If the applicant or the concerned officer or jurisdictional officer does not agree with the findings of AAR. Then, they can file an appeal with AAAR.
2. The applicant is required to file an appeal in form GST ARA-02 with fees of ten thousand rupees. Along with any appeal which must be filed within 30 days from receipt of the advance ruling.
3. An appeal may also be filed by the concerned officer or jurisdictional officer in form GST ARA-03, where no fee is required to be paid for filing such an appeal.
4. The AAAR must pass an order on the appeal filed, within 90 days of the filing of an appeal.
Where the application for advance judgment is rejected?
1. Determination of export of services-(POS)
Reason for rejection– If the applicant’s question was related to the place of supply. It is not a matter on which the authority is empowered to give an advance ruling.
2. Procedural aspects related to E-Way bill
Reason for rejection– The issues sought for advance ruling related to the procedural aspects of the E-Way bill which does not fall within the ambit of authority.
3. Past period activity
Reason for rejection– Matters related to qualifies for advance ruling whether it will be undertaken or proposed to be undertaken.
4. Non- Payment of fees for advance ruling
Reason for rejection-It is mandatory to pay applicable fees under the Act. Non- payment of fees for the application shall not be considered complete.
Conclusion:
Hence, the overall objective of the advance ruling is to provide certainty to the applicant, and it also ensures that disputes are minimized. Advance Ruling can even increase the scope of interpretation of the law and for the benefit of the applicant to file an advance ruling for planning in case the transactions being undertaken or to be undertaken are complex and involves huge capital investment.
