‘Advance ruling’ means a decision provided by the Authority or the Appellate Authority to an applicant on matters or on questions specified in sub-section (2) of section 97 or subsection (1) of section 100 of the CGST Act, 2017, in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant.
GST law has made a provision for all registered as well as the unregistered person for taking benefit of advance ruling on the matter specified in Section 97(2) & Section 100(1) of the CGST Act, 2017 with the following objects.
Objectives of Advance Ruling
The broad objectives for setting up a mechanism of Advance Ruling are:
1. Provide certainty in tax liability in advance in relation to an activity proposed to be undertaken by the applicant;
2. Attract Foreign Direct Investment (FDI)
3. Pronounce ruling expeditiously in a transparent and inexpensive manner
Considering the current judgements at the level of the Authority of Advance Ruling (AAR) many judgement are given without looking into the genuineness of the transactions, facts and other information presented on the records.
It has been a general observation of the ruling at AAR that AAR has an inclination towards department and not the applicant for pronouncing judgements. Department has always has defined objective of widening the revenue base, though this should be objective and must be in their KRA but one should also give proper justice to the facts presented before them.
Lets deep dive in some of the recent pronouncement of AAR wherewith the crystal-clear facts AAR has erred in giving lawful decisions which were later turned down by AAAR when the aggrieved applicant approaches them.
2019 (6) TMI 1236 – AUTHORITY FOR ADVANCE RULING, MAHARASHTRA, IN RE: M/S. GENERAL MANAGER ORDNANCE FACTORY BHANDARA, GST-ARA-79/2018-19/B-168, Dated: – 24 December 2018
In the above AAR application Ordnance Factory Bhandara filed an application with the various question regarding the applicability of GST, availability of Input Tax Credit, Reversal of ITC were asked based on the fact that whether they can be treated as Government or not as per section 2(53) of the CGST Act, 2017.
In support of their contention Ordnance Factory Bhandara has presented the following facts: –
Department’s submission on the facts: –
The Indian Ordnance Factories is an industrial organization, functioning under the Department of Defence Production of Ministry of Defence, Government of India. It is engaged in research, development, production, testing, marketing and logistics of a comprehensive product range in the areas of air, land and sea systems. This is the Apex board having industrial status functioning under the control of the Ministry of Defence.
However, the Govt. of India is a union Govt. created by the constitution of India as the legislative, executive and judicial authority of the Union Of India of states and union territories of the constitutionally democratic republic.
On the above facts, though ordnance factory is functioning under the Ministry of Defence, Govt. of India, the organization shall not be treated as “Government” defined under section 2(53) of the CGST Act,2017, since the organization is having Apex Body and industrial status. Hence, the contention of the applicant that their organization is ‘Government” is not legal and correct.
Pronouncement of Decision by AAR: –
Final Decision by AAAR: –
Comments from Article writer
Considering the observation made by AAAR on the same facts which must have been presented to AAR for the judgement where it was visible on the records that all the contracts are executed on behalf of the President of India, and tagging Ordinance Factory as an Industrial Units is certainly lack of judicious decision making. AAR should be more prudent in decision making and must certainly discuss facts on records should give proper reason backed by the jurisprudence.