Advance Ruling in GST?

An advance ruling is a mechanism, wherein, the applicant can seek clarification with respect to the position of the transaction in question under the relevant tax laws.

Likewise, under GST too, the applicant can seek advance rulings for questions relating to classification; taxation; registration etc. Advance ruling certainly helps the taxpayer in planning the GST liability, in complicated matters, well in advance.

A legally formed body know as ‘Authority for Advance Ruling’ will give a binding ruling to an applicant under GST. Going through the current article, one will easily grab an understanding of the concept and procedure of advance ruling under GST.

Meaning of the term ‘Advance Ruling’

The word ‘advance ruling’ is defined under section 95(a) of the Central Goods and Services Tax, 2017. The gist of the definition is as under-

• The referred matter should be covered within the scope of section 97(2) or section 100(1) of the CGST Act.
• It covers both supplies of goods/ services or both undertaken or proposed to be undertaken.
• The decision is provided by either the Authority for Advance Ruling or Appellate Authority for Advance Ruling.

Hence, from the above, it is clear that the advance ruling matter needs to be covered within the scope of the mentioned sections. The coverage of the advance ruling is explained hereunder.

Matters covered within ‘Advance Ruling’

‘Advance Ruling’ can be sought for the following matters/ questions [section 97(2)]-

1. Classification of goods/ services or both.
2. Determination of time as well as the value of supply of goods/ services or both.
3. Determination of tax liability on any goods/ services or both.
4. Applicability of any notification issued under the Act.
5. Admissibility of Input Tax Credit (ITC) of the tax paid/ deemed to have been paid.
6. Requirement of obtaining registration under the Act.
7. Coverage of specific thing/ transaction undertaken amounts to the supply of goods/ services or both.

On the other hand, provisions of section 100(1) state that any person (i.e., an applicant or concerned/ jurisdictional officer) aggrieved by the decision of the authority of advance ruling can file an appeal to the appellate authority.

Flow of action under advance ruling

The flow of action under advance ruling is summarized hereunder-

A) Filing of an application for advance ruling-

a) The applicant willing to obtain an advance ruling is firstly required to file an application in Form GST ARA-01.

b) While applying, the applicant is required to pay fees of INR 5,000.

B) Admission/ rejection of an application by the authority-

a) On receipt of the application, the authority will examine the application and available records/ documents.

b) Based on the examination, the authority will either admit or reject the application.

c) However, before rejecting the application, the authority is mandatorily required to give an opportunity of being heard to the applicant.

C) Line of action of the authority when the application is admitted-

a) Examine and call for such other needed information.

b) Give an opportunity of being heard to both the applicant and the concerned officer.

c) In case of a difference of opinion between the members of advance rulings, the same will be referred to the Appellate Authority for Advance Rulings.

d) Pronounce advance ruling on the matter. Notably, the authority is required to pronounce the judgement within 90 days from the date of receipt of the application.

e) A copy of the advance ruling pronounced by the authority will be sent to the followings-

• The applicant;
• The concerned officer; and
• The jurisdictional officer.

D) Filing of an appeal to the appellate authority-

a) Any person (i.e., the applicant or the concerned/ jurisdictional officer) aggrieved by the judgement of advance ruling can prefer an appeal to the appellate authority.

b) Application form and filing fees of the same are-

c) Notably, the above referred appeal is to be filed within a period of 30 days (further extendable to 30 days).

E) Passing of an order by the appellate authority-

a) On receipt of an application, the appellate authority may give an opportunity of being heard and pass appropriate order.

b) As per section 101(2) of CGST Act, The appellate authority is required to pass an order within a period of 90 days from the date of filing of an application.

c)  As per section 101(3) of CGST Act, in case of a difference of opinion between the members of the appellate authority, it will be deemed that no advance ruling can be issued with respect to the question under appeal.

d) A copy of an advance ruling pronounced by the appellate authority will be sent to the followings-

• The applicant;
• The concerned officer;
• The jurisdictional officer; and
• The authority of advance ruling.

Some important points

1) Applicability of advance ruling judgment-

An advance ruling judgment will be binding only on the following-

• An applicant; and
• The concerned officer or jurisdictional officer.

In nut-shell, advance ruling judgment is applicable only to the person who has sought the advance ruling. It cannot be made applicable to any other taxable person.

2) Rectification of order under advance ruling-

Any mistake apparent from the record can be rectified. The mistake can either be noticed by the advance ruling authority or can be pointed out by the applicant or concerned officer or jurisdictional officer.

Rectification of order is possible only within a period of 6 months from the date of the order.

3) Circumstances under which advance ruling will be void/ cancelled-

Any advance ruling pronouncement/ judgement obtained on the basis of fraud or misrepresentation of facts or suppression of material facts on the part of the applicant will be declared to be void.

However, the opportunity of being heard needs to be given to the applicant prior to the cancellation of the advance ruling.

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