Under section 95 of CGST/SGST Act and section 12 of UTGST Act, ‘Advance Ruling’ means a expert decision provided by the Authority or the Appellate Authority to an petitioner / applicant on the matters or on the questions specified in section 97(2) or 100(1) of CGST/SGST Act as the case may be, with regard to the supply of goods and or services proposed to be under taken or being undertaken by the petitioner /applicant.
It is stated that Advance Ruling can be sought on the following issues:
(i) Classification of any goods or services or both;
(ii) Applicability of a notification issued under the provisions of this Act;
(iii) Determination of time and value of supply of goods or services or both;
(iv) Admissibility of input tax credit of tax paid or deemed to have been paid;
(v) Determination of the liability to pay tax on any goods or services or both;
(vi) Whether applicant is required to be registered;
(vii) 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.
The very purpose and object and the broad ideology for setting up such an authority is defeated like:
i. provide certainty in tax liability in advance in relation to an activity proposed to be undertaken by the applicant only;
ii. To attract Foreign Direct Investment (FDI);
iii. To reduce litigation; (But it appears to increase the litigation in order to gain Rs. 5,000/- on every application. The number of applications, the number of Rs. 5,000/- will be gain to Government).
iv. Pronounce ruling expeditiously in transparent and inexpensive manner. (There is no transparency in the ruling since it is not useful to anyone except for the applicant / dealer.
An applicant can apply for advance ruling even before taking up a transaction (proposed supply of goods or services) or in respect of a supply which is being undertaken. The only restriction is that the question being raised is already not pending or decided in any proceedings in the case of applicant.
It means the ruling will be given only once to the applicant / dealer.
As per Section 98(6) of CGST/SGST Act, the Authority shall pronounce its ruling in writing within ninety days from the date of receipt of application. Otherwise what will happen is not specified. Whether the payment of Rs. 5,000/- is to be paid again for extension of time?
There will be one AAR and AAAR for each State.
Section 103 provides that an advance ruling pronounced by AAR or AAAR shall be binding only on the applicant who sought it in respect of any matter referred to in 97 (2) and on the jurisdictional tax authority of the applicant. Which means that an advance ruling is not applicable to anyone except to the person applied in the state by remitting Rs. 5,000/- and it is not binding on other jurisdictions of the State and for other states.
For Example: Suppose you are in Telangana State, apply for advance ruling by remitting Rs. 5,000/-. The AR Authority will pronounce its ruling and is applicable only in the to the person applied and only for that particular jurisdictional authority. If he go to AP or Tamilnadu and produce the same ruling, it is not applicable. There again the applicant have to remit Rs. 5,000/- and apply for advance ruling. There shall be a slogan ‘one country, one ruling’
The advance ruling is binding only to the person applied and it has no value or authenticity of ruling. It may change from person to person and jurisdiction to jurisdiction.
Further the Act does not provide for a fixed time limit for which the ruling shall apply. Section 103 ( 2 ), it is provided that advance ruling shall be binding till the period of change in the Act, Thus, a ruling shall continue to be in force so long as the transaction continues and so long as there is no change in Act. Everyone will agree that the GST Act is nothing but for Notifications, circulars and Government orders.
For Example an applicant is getting his advance ruling that certain commodity is rated at 18%. After getting the ruling, a Notification will be released by the GST Committee that the rate of tax has been reduced to 5% or 12% then the ruling will be automatically will be ceased. It is not useful even to the applicant.
Section 98 provides the procedure for dealing with the application for advance ruling. The AAR shall send a copy of application to the officer in whose jurisdiction the applicant falls and call for all relevant records. The AAR may then examine the application along with the records and may also hear the applicant. Thereafter AAR will pass an order either admitting or rejecting the application.
Application has to be rejected if the question raised in the application is already pending or decided in any proceedings in the case of applicant under any of the provisions of GST Act(s) If the application is rejected, it should be by way of a speaking order giving the reasons for rejection (and the fee paid will not be refunded under any circumstances).
As on today, over 180 Rulings of AAR have been reported wherein there are some rulings conflicting rulings also.
Last but not the least, the provision of Advance Ruling has been framed by the Government to minimize the litigation in the GST regime. But it seems to be reversal.
Any proceeding before the Advance Ruling Authority to be deemed to be a judicial proceeding. The order pass by the Advance Ruling Authority is binding upon the applicant and jurisdictional authorities and also to the public at large. The Advance Ruling Authority is certainly one of the useful dispute resolution mechanisms to settle dispute between tax payers and department. But, the present system of Advance Rulings is dissimilar and narrow scope of applicability in the GST regime.
The Actual Advance Rulings would be available to all the taxpayers for the whole Nation then only AAR orders will have prominence and reduces maximum litigation in the country and the very purpose and object of the Act will be served. Otherwise it will be treated as the opinion given by the Advocates to their clients.