What is Advance Ruling:
Advance ruling” means a decision provided by the Authority or the Appellate Authority to an applicant on matters or on questions specified in Section 97(2) or Section 100(1) of the CGST Act, in relation to the supply of goods or services or both proposed to be undertaken or being undertaken by the applicant.
“Applicant” means any person registered or desirous of obtaining registration.
Why is advance ruling under GST necessary:
The objective of any advance ruling, including under GST is to-
- Provide certainty for tax liability in advance in relation to a future activity to be undertaken by the applicant.
- Attract Foreign Direct Investment (FDI) – By clarifying taxation and showing a clear picture of the future tax liability of the FDI. The clarity and clean taxation will attract non-residents who do not want to get involved in messy tax disputes.
- Reduce litigation and costly legal disputes.
- Give decisions in a timely, transparent and inexpensive manner.
- Pronounce ruling expeditiously in a transparent and reasonable manner;
- Seeking advance ruling does not include much cost.
- Opportunity of personal hearing can be granted to applicant.
Significance of Advance Ruling
- Helps the applicant in planning his activities which are liable for payment of GST, well in advance.
- Determining the tax liability well in advance.
- Binding on the applicant as well as Government authorities.
- Avoiding long drawn and expensive litigation at a later date.
- Seeking an advance ruling is inexpensive and the procedure is simple and expeditious.
- Certainty and transparency to a taxpayer with respect to an issue which may potentially cause a dispute with the tax administration.
Constitution of ‘Authority for Advance Ruling:
CGST Act – The Authority for Advance Ruling constituted under the provisions of SGST Act or UTGST Act shall be deemed to be the Authority for Advance Ruling in respect of that State or Union Territory.
SGST Act – The State Government shall, by notification, constitute an Authority to be known as the Delhi State Authority for Advance Ruling. Provided that the Government may, on the recommendation of the Council, notify any Authority located in another State to act as the Authority for the State.
UTGST Act – The Central Government shall, by notification, constitute an Authority to be known as the (name of the Union territory) Authority for Advance Ruling: Provided that the Central Government may, on the recommendations of the Council, notify any Authority located in any State or any other Union territory to act as the Authority for the purposes of this Act.
The Authority shall consist of-
(i) one member from amongst the officers of central tax to be appointed by the Central Government; and
(ii) One member from amongst the officers of State tax to be appointed by the State Government.
- The qualifications, the method of appointment of the members and the terms and conditions of their services shall be such as may be prescribed.
- The Central Government and the State Government shall appoint officer of the rank of Joint Commissioner as member of the Authority of Advance Ruling.
- Each State & UT will have its own Advance Ruling Authority.
- The Authority will comprise one member CGST and one member SGST.
- Such members will be of designation Joint Commissioner.
Application for Advance ruling – Sec 97
Advance Ruling can be sought for the following questions:
- Classification of goods or services or both;
- Applicability of a Notification;
- Determination of time and value of supply of goods or services or both;
- Admissibility of Input Tax Credit;
- Determination of liability to pay tax on any goods or services or both;
- Whether the applicant is required to be registered;
- Whether any particular thing done by the applicant qualifies as ‘supply’ within the meaning of the term
Procedure of Filing Application
- An Applicant desirous of obtaining an Advance Ruling may make an application in such form and manner and accompanied by such fee as may be prescribed.
- An application for obtaining an advance ruling shall 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.
- Payment of fees can be made only using electronic cash ledger. Electronic credit ledger cannot be used for payment fee.
When can one request for GST Advance Ruling:
Any taxpayer can request for advance ruling when he is uncertain of the provisions. Advance tax ruling is applicable on –
(a) Classification of any goods and/or services under the Act
(b) Applicability of a notification which affects the rate of tax
(c) Determination of time and value of supply of goods/services
(d) Whether input tax credit paid (or deemed to be paid) will be allowed
(e) Determination of the liability to pay tax on any goods/services
(f) Whether the applicant has to be registered under GST
(g) Whether any particular thing done by the applicant regarding goods/services will result in a supply.
Process of Advance Ruling under GST
An advance ruling is first sent to Authority for Advance Ruling (Authority). Any person unhappy with the advance ruling can appeal to the Appellate Authority for Advance Ruling (Appellate Authority).
Process of Advance Ruling under GST
Application for Advance ruling has to be made in FORM GST ARA-01 along with Rs. 5,000.
Decision of the Authority
The Authority can by order, either admit or reject the application.
Will all applications be allowed:
The Authority will NOT admit the application when-
(b) The same matter has already been decided in an earlier case for the applicant
(c) 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.
When will the authority give their decision:
Advance ruling decision will be given within 90 days from application.
If the members of the Authority differ in opinion on any point, they will refer the point to the Appellate Authority.
Advance Ruling will have prospective effect only.
On whom will the advance ruling apply:
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.
Appeal to the Appellate Authority
If the applicant aggrieved by the advance ruling he can appeal to the Appellate Authority.
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