Kohana Sagi
Authority of advance ruling is an adjudicatory and independent body which issues rulings on questions related to transactions of tax or on matters of tax, generally involving avoidance of tax. The term advance ruling is defined as a decision provided by the Authority or Appellate Authority on questions specified by the applicant and the provisions for Advance Ruling have been levied under the chapter XVII of the Central Goods and Services Act, 2017. The ruling will be issued within six months of the receipt of an applicant and it will be binding on both the applicant and the Income Tax Department/ Government Authorities. An applicant can obtain the advance ruling only if he is taxable person who is registered or if he is liable to registration or is defined under any category of the section 245N of the Income Tax Act, 1961. Advance ruling can be sought only in the matters of registration of applicant under the Act, classification of goods and services, determination of time and value of supply of goods and services, admissibility of Input Tax Credit or tax paid or tax deemed to be paid or any tax liability. The main purpose of Advance Ruling is to provide certainty and transparency in tax liability for all kinds of taxpayers, to reduce tax litigation and to attract foreign investment. A certain and transparent tax system attracts more investors. If the methods of taxation are vague, then it causes increase in costs of businesses. It also avoids future disputes requiring lengthy or time consuming mechanism to resolve disputes or any further litigations. As it is an authoritative, simple and non-expensive procedure, it ensures smooth relationship between the taxpayer and the administration with respect to the obligations under the GST law.
FUNCTIONING OF AUTHORITY OF ADVANCE RULING AND APPELLATE AUTHORITY OF ADVANCE RULING
Advance ruling can be sought in prescribed and written form of application through a question along with relevant documents and only in the matters which has not been pending in proceedings or if the decision in the particular matter has not already been made. The application is examined along with the records and it may either be accepted or rejected. Any application will not be rejected without giving a chance to the applicant to be heard and the reasons for rejection will be mentioned in the order. The interpreted decision of the tax authorities will be passed in a duly signed and written form to the applicant and cannot be communicated orally as per section 95(a) of the Central Goods and Services Tax Act,2017. The power of authorities is the same as the powers of a civil court under Civil Code Procedure, 1908. All proceedings before the authorities are considered as judicial proceedings as per section 193 and section 228 of the Indian Penal Code, 1860. The Authority of Advance Ruling or the Appellate Authority of Advance Ruling can also exercise powers of a Civil Court such as discovery and inspection, enforcing the Oath and examination of a person, compelling for providing documents, books of account or records. Advance Ruling will be binding and continue to be in force until the facts, circumstances or the law changes. If a person is aggrieved by the decision provided by Authority of Advance ruling, then the applicant or the jurisdictional officer or the concerned officer can appeal to the Appellate Authority of Advance Ruling within thirty days of receipt of Advance ruling as prescribed in the GST rules and the Appellate Authority of Advance Ruling has to pass a decision within ninety days of filing the appeal. Appellate Authority of Advance Ruling is constituted under the provisions of State Goods and Services Tax act or Union Territory Goods and Services Tax Act and is deemed to be an authority under the Central Goods and Services Tax Act, 2017. Therefore, the ruling passed by the Authority of Advance Ruling and the Appellate Authority of Advance Ruling will be applicable only within the State’s jurisdiction or a Union territory jurisdiction. Both the Authority of Advance ruling and the Appellate Authority of Advance Ruling can rectify any mistake or amend the order passed by them within the period of six months from the date of order. If the rectification reduces the amount of Input Tax Credit or enhances the tax liability, then the opportunity to be heard will be given to the applicant before the decision is passed.
Any mistake made by the Authorities should be noticed by the itself or the applicant or the jurisdictional officer (either Central Goods and Services Tax Officer or the State Goods and Services Tax Officer). In case, the person is aggrieved or unhappy with the findings of the Appellate Authority of Advance Ruling, then the applicant or the jurisdictional officer or the concerned officer may file a writ against the order of Appellate Authority of Advance Ruling in the following one after another order, first to the National Appellate tribunal, then in the High Court and later in the Supreme Court respectively. However, in certain cases an appeal cannot be filed and the applicant will be provided with remedies or reliefs as under the Constitutional Law. If the Advance ruling is sought by committing fraud or misrepresenting or suppressing of facts, the ruling will become Void Ab Initio. Any application involving the determination of value of the property or its fair value and any issue relation to transaction created for avoiding the tax burden is not allowed by the Authority of Advance Ruling.
Every state has one Authority of Advance Ruling and Appellate Authority of Advance Ruling for dealing with tax matters of GST. Authority of Advance ruling under GST comprises of one member from CGST and one member from SGST/UTGST appointed by State Government and Central Government sequentially. Appellate Authority of Advance Ruling consists of Chief Commissioner of Central tax appointed by the Central Board of Direct Taxes and a Commissioner of State Tax. Even in cases of vacancies, the proceedings of advance ruling will not be effected. If there is a difference of opinion between the two members of the Authority of Advance Ruling, those points can be diverted to Appellate Authority of Advance Ruling for hearing and if the members of Appellate Authority of Advance Ruling cannot come to a common conclusion on those points, then it is deemed that any advance ruling cannot be issued on the respective points of the question of applicant. As the issue decided by the Authority of Advance Ruling and Appellate Authority of Advance Ruling cannot be subjected to litigation, the litigation matters can be curbed completely and litigation costs can also be avoided by the applicant. The process of filing a writ against the orders issued by the Authority of Advance Ruling or the Appellate Authority of Advance Ruling directly helps every applicant who is unhappy with the ruling and all the issues can be settled in either High Court or Supreme Court with a solution in a maximum period of three to five years.
Prior the GST era, the rulings were always delayed and it raised the number of litigations. After, the Authority of Advance Ruling has been established, the procedure to obtain the solution for disputes has been made transparent and simple for the taxpayers. An appellate Authority of Advance Rulings has also been established to address the issues of aggrieved applicants. Initially, it was believed by most of the taxpayers that the Authority of Advance Ruling gives a competent and independent ruling. However, one of the main drawbacks of setting up of the Authority of Advance Ruling or Appellate Authority of Advance Ruling is divergence in passing the Advance Rulings. Different rulings can be issued by the Authorities of two different states on the same issues. The main issue with respect to such divergence in decisions may affect the taxpayer who has businesses in different states and may be subject to multiple jurisdictions and there will be ambiguity in choosing which ruling to follow for different transactions as the ruling from one state to another differs. In most cases, the applicant may get ruling in his favor with documents/records to substantiate their claims. There can also be a decrease in the quality of rulings with the availability of such quicker mechanism to resolve disputes and the time required to analyze each issue with analysis and consideration seems to be misplaced. The authorities cannot verify the facts in each case. Both the Authority of Advance Ruling and the Appellate Authority of Advance Ruling shall pass the Advance Ruling by following a timeline as the issue should be resolved within a specific period after appealing. Therefore, a mandate Advance Ruling within the given time period should be implemented for ensuring the objectives of setting of such independent bodies for resolving the disputes. To overcome this difficulty, GST council has recommended to establish an Appellate Authority in a centralized manner and with the approval of Union Cabinet, GSTAT, a GST national Tribunal has been formed to address the contradictory rulings in such cases and other tax disputes. However, the provisions to comply with or procedure to be followed by the GSTAT have not been formed at present. Hence, the Government is currently working on the mechanism of Advance Ruling.
NEED FOR SETTING UP OF NATIONAL APPELLATE AUTHORITY
Importance of establishing the National Appellate Authority is to resolve the conflicts arising out of Advance Ruling passed by two or more States or Union Territories. It was also set up to curb the dilemmas related to the GST and reduce other issues of tax. The composition of National Appellate Authority contains president, technical member from both the State and Central. In cases of difference of opinion between the members, then the decision of majority members shall be considered. If any error is noticed by the National Authority of Advance Ruling.
CONCLUSION
Authority of Advance ruling and the Appellate Authority of Advance Ruling are useful mechanisms to achieve a solution and to settle the issues of taxpayers. If the provisions of Advance Authority are simplified by GST council, it can function better. The effectiveness and efficacies of the mechanisms of both the Authority of Advance Ruling and Appellate Authority of Advance Ruling should be improved. If the Authority of Advance Ruling and the Appellate Authority of Advance Ruling are made independent on national level, then the differences of divergence in issuing rulings can be terminated. This may lead to an immense increase in number of applicants seeking for rulings. To function effectively, these authoritative bodies should alter the composition and put more members with qualified experience on different levels to address issues with more feasibility. The ruling passed in one case should be applied across country which will bind the taxpayers dealing with the similar case. Instead of establishing a new authoritative national body like National Authority of Advance Ruling, certain changes can be made to the existing bodies. Therefore, more provisions and mechanisms should be provided under Authority of Advance Ruling and Appellate Authority of Advance Ruling as the powers of the National Authority of Advance Ruling are the same as powers of Authority of Advance Ruling and Appellate Authority of Advance Ruling.
BIBILIOGRAPHY
https://icmai.in/upload/Taxation/PPT/Advance-Ruling.pdf
https://cleartax.in/s/advance-ruling-gst
https://nacin.gov.in
https://cbic-gst.gov.in
