Scope of Advance Ruling Under GST Law

The concept of Advance Ruling is not new one, which has borrowed from erstwhile provision of Indirect Tax law. The advance ruling helps the applicant in planning their activities well in advance on ambiguity in Tax provision. The scope of advance ruling is very wide and reduces the quantum of litigation between taxpayers and Tax department. The decision of advance ruling is binding on the applicant as well as Government authorities as a legally constituted body under GST law.

Definition of Advance Ruling Under GST Law:

“(a) “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 sub-section (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;

Advantages of Advance Ruling Under GST Law:-

The major advantages of advance ruling as primary decision making authority on tax law are summarized as under:

1.Seeking advance ruling is cheaper and procedure very simple;

2. Early disposal of application with solution for the applicant;

3. Provide certainty in tax liability in advance in relation to an activity proposed to be undertaken by the applicant;

4. Pronounced ruling expeditiously in a transparent and inexpensive manner;

5. Reduce litigation at the initial stage of ambiguity;

6. Advance ruling can be delivered with conducting due personal hearing of the applicant;

7. With transparent decision attract Foreign Direct Investment (FDI).

Questions Specified for Advance Ruling Under GST Law:

Sub-section (2) of Section 97 of the CGST Act, 2017 has prescribed the questions, on which the advance ruling is sought under this Act, shall be in respect of,––

(a) Classification of any goods or services or both;

(b) Applicability of a notification issued under the provisions of this Act;

(c) Determination of time and value of supply of goods or services or both;

(d) Admissibility of input tax credit of tax paid or deemed to have been paid;

(e) Determination of the liability to pay tax on any goods or services or both;

(f) Whether applicant is required to be registered;

(g) 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.

Authority for Advance Ruling (AAR) Under GST Law:

Section 96 of CGST Act, 2017 has prescribed, the Authority for advance ruling constituted under the provisions of a State Goods and Services Tax Act or Union Territory Goods and Services Tax Act shall be deemed to be the Authority for advance ruling in respect of that State or Union territory.

Appellate Authority for Advance Ruling (AAAR) Under GST Law:

Section 99 of the CGST Act, 2017 has specified the provisions of the Appellate Authority for Advance Ruling constituted under the provisions of a State Goods and Services Tax Act or a Union Territory Goods and Services Tax Act shall be deemed to be the Appellate Authority in respect of that State or Union territory.

Qualification and appointment of members of the Authority for Advance Ruling

The Central Government and the State Government shall appoint an officer having the experience of not less than 3 years in the rank of Joint Commissioner as member of the Authority for Advance Ruling.

Applicability of Advance Ruling:

An advance ruling pronounced by AAR or AAAR shall be binding only on the applicant and on the concerned officer or the jurisdictional officer in respect of the applicant. This clearly means that an advance ruling is not applicable to similarly placed other taxable persons in that State. It is only limited to the person who has applied for an advance ruling. (Section 103 of the CGST Act, 2017)

Time period of Validity / void of Advance Ruling:

There is no specific fixed time period for advance ruling validity; it has been provided that advance ruling shall be binding till the period when the law, facts or circumstances supporting the original advance ruling have not changed.

However, an advance ruling shall be held to be ab initio void if the AAR or AAAR finds that the advance ruling was obtained by the applicant by fraud or suppression of material facts or misrepresentation of facts. An order declaring advance ruling to be void can be passed only after hearing the applicant. (Section 104 of the CGST Act, 2017)

Procedure for obtaining Advance Ruling Under GST Law:

(i) The registered persons or an-applicant desirous of obtaining an advance ruling may make an application to Advance Ruling Authority in FORM GST ARA-01 along with filing fee of Rs. 5,000/-  (sub-section (1) of Section 97 of CGST Act, 2017).

(ii) Upon receipt of an application, the Authority shall send a copy of application to the concerned officer in whose jurisdiction the applicant falls and call for relevant records. The Authority may, after examining the application and the records called for and after hearing the applicant or his authorized representative and the concerned officer or his authorized representative, by order, either admit or reject the application

(iii) Application for advance ruling will not be admitted in cases where the question raised in the application is already pending or decided in any proceedings in the case of an application under any of the provisions of this Act.

(iii) If the application is rejected, it should be by way of speaking order giving the reasons for rejection.

(iv) If the application is admitted, the AAR shall pronounce its ruling within 90 days of receipt of application. Before giving its ruling, it shall examine the application and any further material furnished by the applicant or by the concerned department officer.

(v) Before giving the ruling, AAR must hear the applicant or his authorized representative as well as the jurisdictional officers of CGST /SGST.

(vi)If there is a difference of opinion between the two members of AAR, they shall refer the point or points on which they differ to the AAAR for hearing the issue. If the members of AAAR are also unable to come to a common conclusion in regard to the point(s) referred to them by AAR, then it shall be deemed that no advance ruling can be given in respect of the question on which difference persists at the level of AAAR.

(vii)A copy of the advance ruling pronounced by the Authority duly signed by the members and certified in such manner as may be prescribed shall be sent to the applicant, the concerned officer and the jurisdictional officer after such pronouncement. ( Section 98 of the CGST Act, 2017)

Remedies against order of AAR Under GST Law:

(i)If the applicant is aggrieved with the ruling of the AAR, he can file an appeal with AAAR on the common portal in FORM GST ARA-02 and shall be accompanied by a fee of Rs. 10,000/- to be deposited manner specified sub-section (9) of section 49 of the CGST Act, 2017. Similarly, if the jurisdictional officer of CGST / SGST does not agree with the finding of AAR, he can also file an appeal with AAAR on the common portal in FORM GST ARA-03 and no fee shall be payable for filing the appeal. The jurisdictional officer will be the officer in whose jurisdiction the applicant is located.

(ii)Any appeal must be filed within 30 days from the receipt of the advance ruling. AAR has the power to condone the delay of 30 days on being shown the sufficient cause for the delay.

(iii)The Appellate Authority must pass an order after hearing the parties to the appeal within a period of 90 days of the filing of an appeal.

(iv) If members of AAAR differ on any point referred to in appeal, it shall be deemed that no advance ruling is issued in respect of the question under appeal. ( Section 100 of the CGST Act, 2017)

Orders of Appellate Authority:

(i) The Appellate Authority pass order after giving the parties to the appeal or reference an opportunity of being heard, pass such order as it thinks fit, confirming or modifying the ruling appealed against.

(ii) If the members of the Appellate Authority differ on any point or points referred to in appeal or reference, it shall be deemed that no advance ruling can be issued in respect of the question under the appeal or reference.

(iii) An order declaring advance ruling to be void can be passed only after hearing the applicant.

(iv) A copy of the advance ruling pronounced by the Appellate Authority duly signed by the Members and certified in such manner as may be prescribed shall be sent to the applicant, the concerned officer, the jurisdictional officer and to the Authority after such pronouncement. (Sections 101 of the GST Act, 2017)

(v) A copy of the advance ruling pronounced by the Appellate Authority for Advance Ruling  shall be sent to-

(a) the applicant and the appellant;

(b) the concerned officer of Central Tax and State / Union Territory Tax;

(c) the jurisdictional officer of Central Tax and State / Union Territory Tax; and

(d) the Authority, in accordance with the provisions of sub-section (4) of section 101 of the Act.

Rectification of Advance Ruling Under GST Law:

The law gives power to AAR and AAAR to amend their order to amend any order passed by them under section 98 or section 101 of the CGST / SGAT Act,2017,  so as to rectify any error apparent on the face of the record, if such error is noticed by the Authority or the Appellate Authority on its own accord, or is brought to its notice by the concerned officer, the jurisdictional officer, the applicant or the appellant within a period of six months from the date of the order. Such mistake may be noticed by the authority on its own accord or may be brought to its notice by the applicant or the jurisdictional CGST / SGST officer. If a rectification has the effect of enhancing the tax liability or reducing the quantum of input tax credit, the applicant must be heard before the order is passed. (Section 102 of the GST Act, 2017)

Advance Ruling Void under certain circumstances:

If the Appellate Authority finds that advance ruling pronounced by them and has been obtained by the applicant or the appellant by fraud or suppression of material facts or misrepresentation of facts, it may, by order, declare such ruling to be void ab-initio. Before declaring such ruling an opportunity of being heard in person shall be given to the applicant or the appellant. (Section 104 of the GST Act, 2017)

Powers of AAR and AAAR:  

(i) Both the Authority and the Appellate Authority are vested with the powers of a civil court under the Code of Civil Procedure, 1908, for discovery and inspection, enforcing the attendance of a person and examining him on oath, and compelling production of books of account and other records.

(ii) Both the Authority and the Appellate Authority shall be deemed to be a civil court for the purposes of section 195 of the Code of Criminal Procedure, 1973. Any proceeding before the Authority or the Appellate Authority shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228, and for the purpose of section 196 of the Indian Penal Code. 1860. The both authorities have the power to regulate their own procedure. ( Section 105 of the GST Act, 2017)

Observations and Comments:

1. For filing application with Advance Ruling Authority, it will cost fee of Rs.5000/- and Rs. 10,000/- for Appellate Authority for a registered person whereas no fee shall be payable by the department officer. By which , it will give free hands of power to the department officer to file appeal against all  orders which are in the favour of registered person  as no fees and no restriction has imposed on the department officers to file appeal with monetary limit as it was earlier law;

2. Advance Ruling Authority shall decide the dispute  within 90 days of submission of application and further 90 days will take at Appellate Authority to pass order in a particular issue then early decision and disposal of issue will be dream for the applicant;

3. When the applicant have to wait for decision of the Advance Ruling Authority for  more than one month then his mind will be diverted to some other subject and  an activity proposed to be undertaken by the applicant will also be changed;

4. Order of the Advance Ruling Authority even though transparent but it is applicable to said applicant and jurisdictional officer, in the similar issue another person have to make another application to the said authority for his own issue;

5. Advance Ruling Authority order meant to reduces litigation of one registered person not for another registered person of the same jurisdiction. So advance ruling authority order is narrow and  micro applicability;

6. Even though, it is specified that Advance Ruling can be delivered with conducting due personal hearing of the applicant but GST Act and GST Rules silent about the manner of intimation of personal hearing shall be communicated to the applicant and number occasions of opportunity shall be accorded to the applicant to represent their facts;

7. Even though recently the provision of filing of manual application to the Advance Ruling Authority has been provided; but fees have to deposited through online portal in that case  an un-registered person cannot file his application as no access to common portal for deposit fees, so the provision of advance ruling is meant for registered person only.

Conclusion: The Advance Ruling Authority concept is certainly one of the useful mechanisms to settle dispute between tax payers and tax department. The utility or reality of Advance Ruling can be achieved, if the provisions of Advance Ruling further simplified by the GST Council.

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Author Details:-

Ramesh Chandra Jena, B. A (Hons.), M.A (Eco.), D.M.M., L.L.B.