Advance ruling passed by the authority of one particular state is not binding on the department of different state and third-party taxpayer
Summary: In the case of Sarkar Diesel v. Deputy Commissioner of State Tax, the Calcutta High Court addressed the applicability of advance rulings issued by tax authorities in one state to taxpayers and departments in different states. The appellant, Sarkar Diesel, relied on an advance ruling from the AAR in Goa related to the same subject matter as their case. However, the Court clarified that such a ruling is not binding on the West Bengal tax authorities or on any third-party taxpayers. The ruling may be applicable to the applicant in Goa, but it does not extend to others outside that jurisdiction. According to Section 103(1) of the CGST Act, advance rulings are binding solely on the applicant who sought the ruling and on the concerned officer within the applicant’s jurisdiction. This emphasizes the principle that tax interpretations and decisions are localized and do not have universal applicability across state lines, thereby protecting taxpayers from potential discrepancies in interpretations by different state authorities. The Court’s ruling reinforces the need for taxpayers to seek clarity from their local tax authorities, as advance rulings are intended to provide guidance primarily within the specific state context.
The Hon’ble Calcutta High Court in the case of Sarkar Diesel v. Deputy Commissioner of State Tax [FMA No. 604 of 2024 dated June 25, 2024] advance ruling passed by the authority of one particular state is not binding on the department of different state and third-party taxpayer.
Facts:
Sarkar Diesel (“the Appellant”) during proceedings before the Hon’ble High Court relied upon the ruling passed by the AAR Goa relating to the subject matter for which the appeal has been filed.
Issue:
Whether advance ruling passed by the authority of one particular state is binding on the department of different state and third-party tax payer?
Held:
The Hon’ble Calcutta High Court in the case of FMA No. 604 of 2024 held that the Advance Ruling rendered in Goa would not be applicable to the Appellant who is registered taxpayer in the State of West Bengal. Also, the Advance Ruling may bind the Department at Goa but cannot bind a third-party tax payer, and bind only the applicant who went before the Advance Ruling Authority for a decision.
Our Comments:
As per Section 103(1) of the CGST Act, the advance ruling pronounced by the Authority or the Appellate Authority is binding only on the Applicant who had sought the advance ruling and on the concerned officer or jurisdictional officer relating to the Applicant.
(Author can be reached at [email protected])
Author Bio
