What is advance ruling?
In general sense, advance ruling is nothing but a written interpretation of tax laws issued by tax authorities to assessee or person who request for clarification of certain tax matters. In the interest of avoiding litigations and trembling taxpayer's confidence, the advance ruling plays a very important role. Through this facility, the taxpayer gets clarity over the ambiguous and complex provisions of the tax law and gets more stability as far as the taxation is concerned. The concept for advance ruling was first introduced in Income tax laws and later on into the indirect taxes as well. As per Section 95(c) of the CGST Act, the 'applicant' means any person registered or desirous of obtaining registration under this Act. An advance ruling is often applied for when the taxpayer is confused and uncertain about certain provisions. This welcome step by the Government was met with overwhelming support from the trade and industry and as a result, thousands of applications were filed before the Advance Ruling Authority seeking clarification on a variety of tax issues. Surprisingly, the Advance Ruling Authorities of various States had not only come up with contradictory rulings on the same subject but also most of the rulings are given in favour of the Revenue only. Advance Ruling (AR) in GST is expected to provide certainty in circumstances where the law is ambiguous and confusing. AR shall provide relief from litigation, heavy penalties and interest which may result in case of demands in future. It is a way of avoiding dispute in future. The provisions of Advance ruling are provided in Sections 95 to 106 of the CGST Act and Rules 103 to 107A of the CGST Rules, 2017.
Advance Ruling :-
As per section 95(a) of CGST/SGST Act, 'advance ruling' means a decision provided by the authority or the Appellate Authority or the National Appellate authority to an applicant on matters or on questions specified in section 97(2) or 100(1) or Section 101C of CGST/SGST Act, in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant.
Authority for Advance ruling :-
Under this chapter, two separate bodies have been constituted; namely Authority for Advance Ruling and Appellate Authority for Advance Ruling. The application shall be made to Authority for Advance Ruling (AAR) and if anyone is aggrieved with the order for Advance ruling, then he may appeal to Appellate Authority for Advance Ruling (AAAR).
Authority for Advance ruling shall be located in each state and shall comprise of one member of CGST and one member of SGST which is to be appointed by the Central Government and the State Government.
Appellate Authority for Advance ruling shall be located in each state and shall comprise of the Chief Commissioner of CGST as designated by the Board and the Commissioner of SGST having jurisdiction over the applicant. There will be one AAR and AAAR for each State.
When can one request for Advance ruling?
As per Section 97(2) of CGST Act, 2017, Advance ruling may pertain to :
(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.
Application for Advance ruling Sec.97(1)–
Application for Advance ruling has to be made on the common portal in FORM GST ARA-01 and shall be accompanied by a fee of five thousand rupees, to be deposited in the manner specified in section 49.The detailed procedure for making application have been prescribed in Rule 104 of the CGST Rules, 2017. 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.
Procedure on receipt of application Sec-98-
On receipt of an application, a copy will be forwarded to the prescribed officer and he will furnish the necessary relevant records.
The Authority can by order, either admit or reject the application. The Authority will NOT admit the application when-(a) The same matter has already been decided in an earlier case for the applicant (b) The same matter is already pending in any proceedings for the applicant.
Applications will be rejected only after giving an opportunity of being heard. Reasons for rejection shall be given in writing.
Advance ruling decision will be given within 90 days from the date of receipt of application. A copy of every order shall be sent to the applicant and to the concerned officer.
If the members of the Authority differ in opinion on any point, they will refer the point to the Appellate Authority.
On whom will the advance ruling apply? Sec.103-
The advance ruling will be binding only –(a) On the applicant (b) On the jurisdictional tax authorities in respect of the applicant.
If the law, facts of the original advance ruling change then the advance ruling will not apply.
The advance ruling is binding only in respect of the matter referred. It has no precedent value. However, even for persons other than applicant, it does have persuasive value.
Appeal to the Appellate Authority Sec.100
Applicant or concerned/jurisdictional officer aggrieved by the order of AAR may appeal to AAAR within 30 days from the date of order of AAR communicated to officer or applicant. This may be further extended to 30 days on submission of proper reasoning. The Appeal shall be filed in Form ARA-02 with Fees of ₹ 10,000. The appeal by the concerned officer shall be in Form ARA-03 without any fees (Refer Rule 106). The order of the AAAR shall be made within 90 days from the date of filing the appeal. Where members of the Appellate Authority differ on any point of the appeal, it shall be deemed that no Advance ruling can be issued in respect of that question under appeal. As per Sec.101 of CGST Act, 2017, the appellate authority may pass such order as it thinks fit, confirming or modifying the ruling appealed against or referred to.
Rectification of Advance Ruling Sec.102
Both the authority can amend its order if there is error apparent on the face of the record within period of six months from the date of its order:
Provided that no order of enhancing the liability or reducing the ITC can be passed unless the opportunity to heard to applicant or appellant has been provided.
When the Advance ruling may be void Sec.104
Where applicant or appellant has obtained the AR by fraud or suppression of material fact or misrepresentation of facts, it may, by order declare the order to be void ab-initio.
National Appellate Authority for Advance Authority (NAAAR):
Appreciating the need of the industry, the Union Budget 2019, tried to address this issue by introducing the National Appellate Tribunal for Advance ruling under Section 101A of the CGST Act, 2017. The National Appellate authority shall consists of the president, who has been a Judge of the Supreme Court or is or has been the Chief Justice of a High Court, or has been a Judge of High Court for a period not less that five years. There are also two technical members in the National Appellate authority. One member from Central and another is officer of the State. The president shall hold office for a term of three years from the date on which he enters upon his office, or until he attains the age of seventy years, whichever is earlier and shall be eligible for reappointment. The Technical member shall hold office for a term of five years from the date on which he enters upon his office, or until he attains the age of sixty-five years, whichever is earlier and shall be eligible for reappointment.
Appeal to National Appellate Authority Sec.101B
The constitution of the National Appellate Tribunal for Advance ruling appears to solve the issue of departmental bias, by introducing a judicial member and also introducing an option of appeal against the orders of the Appellate Authority which was previously absent under the GST Laws. In case of conflicting advance ruling are given by the appellate authority of two or more states or union territories or both, any authorised officer or an applicant being aggrieved by such advance ruling may prefer an appeal to National Appellate Authority. The wording of Section 101B of CGST Act suggests that an appeal before National Appellate Tribunal for Advance ruling would lie only in cases where the views taken either by the members of Appellate Authority of Advance ruling constituted in the same state or in different states are contradictory. Though this new proposal by the Government seems to provide relief in some aspects i.e. when there are contradictory views from either of the members of the same Bench or amongst the coordinate Benches of different states. However, there is no relief provided against the order of the AAAR if the ruling goes against the assessee. Therefore, the National Appellate Tribunal for Advance ruling would have a limited utility, and this brings the taxpayer back to square one. Every appeal under this section shall be filed within a period of thirty days from the date on which the ruling sought to be appealed against is communicated to the applicants, concerned officers and jurisdictional officers:
Provided that the officer authorised by the Commissioner may file appeal within a period of ninety days from the date on which the ruling sought to be appealed against is communicated to the concerned officer or the jurisdictional officer.
The National Appellate authority has to pass the order within ninety days from the date of filling of the appeal u/s 101B.
As per Section 105 of the CGST Act, 2017 the authority or the appellate authority and National authority shall have all the powers of a civil court under the Code of Civil Procedure, 1908 for the purpose of exercising its powers under this Act.
Appeal against the Advance ruling before High Court or Supreme Court
The CGST /SGST Act do not provide for any appeal against the ruling of Appellate Authority for Advance rulings. Thus no further appeals lie and the ruling shall be binding on the applicant as well as the jurisdictional officer in respect of applicant. However, Writ Jurisdiction lies before the Hon'ble High Court or Supreme Court.
Manual Filing of applications before AAR & AAAR Rule-107A
As per rules 104 and 106 of the CGST Rules, 2017 the application for obtaining an advance ruling and filing an appeal against an advance ruling shall be made by the applicant on the common portal. However, due to the unavailability of the requisite forms on the common portal, a new rule 107A has been inserted vide notification No. 55/2017-Central Tax, dated 15.11.2017, which states that in respect of any process or procedure prescribed in Chapter XII, any reference to electronic filing of an application, intimation, reply, declaration, statement or electronic issuance of a notice, order or certificate on the common portal shall, in respect of that process or procedure, include the manual filing of the said application, intimation, reply, declaration, statement or issuance of the said notice, order or certificate in such Forms as appended to the CGST Rules. Circular No. 25/25/2017-GST dated 21.12.2017 prescribing the detailed procedure for manual filing of applications for Advance Ruling and appeals before Appellate Authority for Advance Ruling has been issued. Therefore, till the advance ruling module is made available on the common portal, the following conditions and procedure have been prescribed for the manual filing and processing of the applications.
Conclusion
To conclude it can be stated that the intention of the Law Maker is to provide certainty to the taxpayer with respect to his obligations under the GST Act and an expeditious ruling, so that the implementation of the law is smooth and transparent and helps to avoid unnecessary litigation.Timelines are also given, within which the ruling is to be given by the concerned authority.
❑❑
