22-Advance Ruling

1. INTRODUCTION

Meaning & Purpose of Advance Ruling under GST

• An advance ruling helps the applicant in planning his activities which are liable for payment of GST, well in advance.
• It also brings certainty in determining the tax liability, as the ruling given by the Authority for Advance Ruling is binding
on –
▸ the applicant, and
▸ the concerned Officer or the Jurisdictional Officer in respect of the applicant.
• Further, it helps in avoiding long drawn and expensive litigation at a later date.
• Seeking an advance ruling is inexpensive and the procedure is simple and expeditious.

Benefits for Taxpayer

• It thus provides certainty and transparency to a taxpayer with respect to an issue which may potentially cause a dispute
with the tax administration.
• A legally constituted body called Authority for Advance Ruling (AAR) can give a binding ruling to an applicant who is
registered under GST or is desirous to be registered.
• The advance ruling given by the Authority can be appealed before an Appellate authority for Advance Ruling (AAAR).
• There are time lines prescribed for passing an order by AAR and by AAAR.

Broad Objectives for Setting up Advance Ruling Mechanism

Objective
 provide certainty in tax liability in advance in relation to an activity proposed to be undertaken by the applicant;
 attract Foreign Direct Investment (FDI) by ensuring certainty in taxation aspects of transactions
 reduce litigation
 pronounce ruling expeditiously in a transparent and inexpensive manner

Statutory Provisions
• Chapter XVII – Advance Ruling [Sections 95 to 106] of the CGST Act and
• Chapter XII – Advance Ruling [Rules 103 to 107A], stipulate the provisions relating to advance ruling.
• State GST laws also prescribe identical provisions in relation to advance ruling.

2. RELEVANT DEFINITIONS
Term Definition (retaining every word – spread neatly)
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,
➤ in relation to the supply of goods or services or both
➤ being undertaken or proposed to be undertaken by the applicant;
[Section 95(a)].
Appellate means the Appellate Authority for Advance Ruling referred to in section 99.
Authority [Section 95(b)].
Applicant means any person registered or desirous of obtaining registration under this Act;
[Section 95(c)].
Application means an application made to the Authority under sub-section (1) of section 97;
[Section 95(d)].
Authority means the Authority for Advance Ruling referred to in section 96;
[Section 95(e)].

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3. QUESTIONS FOR WHICH ADVANCE RULING CAN BE SOUGHT

[Section 97]
The definition of advance ruling given under the Act is a broad one.

Under GST, advance ruling can be obtained on:

➤ a proposed transaction, as well as
➤ a transaction already undertaken by the appellant.

Advance Ruling can be sought for the following questions:

Clause Question
(a) ➤ classification of any goods or services or both
(b) ➤ applicability of a notification issued under the provisions of CGST 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.

Note: Matters which cannot be questioned before AAR are:-

➤ Question already pending in any proceedings in the case of an applicant under any of the provisions of the Act
➤ Question already decided in any proceedings in the case of an applicant under any of the provisions of the Act

4. AUTHORITY FOR ADVANCE RULING (AAR) AND APPELLATE AUTHORITY FOR ADVANCE RULING (AAAR)
[Section 96 and Section 99]

The Authority for Advance Ruling (AAR) constituted under the provisions of the
SGST Act or UTGST Act shall be deemed to be the AAR in respect of that State/UT under the CGST Act, 2017 also.

The Government shall appoint officers not below the rank of Joint Commissioner as member of the AAR (as per Rule 103).

The Appellate Authority for Advance Ruling (AAAR) constituted under the provisions of a
SGST Act or UTGST Act shall be deemed to be the AAAR in respect of that State/UT under the CGST Act, 2017 also.

Thus, it can be seen that both the AAR & AAAR are constituted under the respective SGST/UTGST Act and not under the
CGST Act.
• Hence, the ruling given by AAR/AAAR shall be applicable only within the jurisdiction of the concerned State/UT.
• For this reason, questions on determination of place of supply cannot be raised before AAR or AAAR, as these
authorities are State/UT specific, whereas
place of supply issues involve inter-State implications.

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5. PROCEDURE FOR OBTAINING ADVANCE RULING [SECTION 98]

• Applicant desiring advance ruling –
• Should make an application to the AAR in a prescribed form and manner (on the Common Portal)
• Shall be accompanied by a fee of ₹5,000 each towards CGST and SGST

• Application requirements –
• The application, verification, and all relevant documents
• Must be signed in the prescribed manner

• Steps by AAR after receipt of application –

• AAR shall send a copy of application to the concerned officer
• If necessary, call for all relevant records from the concerned officer
• Relevant records called for shall be returned to the concerned officer as soon as possible

• Examination & Order by AAR –

• AAR will examine the application + records
• After hearing the applicant / authorised representative
• Will pass an order either admitting or rejecting the application

• Non-admission of application –
• If question raised in application is already pending or decided in any proceedings in case of the applicant under any
provisions of this Act

• Rejection shall be –
• By a speaking order giving reasons
• And only after giving an opportunity of being heard to the applicant

• Communication of order –
• Copy of Order admitting/rejecting shall be sent to applicant and concerned officer

• Timeline –
• On admission, AAR shall pronounce ruling within 90 days of receipt of application
• Before giving ruling, examine application and further material placed by applicant / obtained by authority
• Hearing opportunity –
• Before pronouncing ruling, opportunity of being heard is given to:
‣ Applicant / authorised representative
‣ Concerned officer / authorised representative

• Difference of opinion between AAR Members –

• Point(s) of difference shall be referred to AAAR
• If members of AAAR also unable to come to common conclusion, then it shall be deemed that no advance ruling can
be given in respect of the question on which difference persists

• Communication of ruling –
• A copy of advance ruling, duly signed by members and certified, shall be sent to:
‣ Applicant
‣ Concerned officer
‣ Jurisdictional officer

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6. APPEALS AGAINST ORDER OF AAR TO THE APPELLATE AUTHORITY [SECTION 100 & 101]
• Eligibility to appeal –
• If applicant is aggrieved with the finding of AAR → may file an appeal with AAAR
• If concerned/jurisdictional officer of CGST/SGST disagrees with finding of AAR → can also file appeal with AAAR

• Time limit for filing appeal –

• Appeal must be filed within 30 days from the receipt of the Order of AAR
• Additional 30 days may be allowed by AAAR if sufficient cause for delay is shown

• Form & Fees –

• Appeal must be in prescribed form and verified in the prescribed manner
• Appeal by applicant → must be filed with fee of ₹10,000/- each under CGST and SGST Act
• Appeal by concerned/jurisdictional officer → No fee is required

• Signing of appeal documents –

• In case of concerned/jurisdictional officer:
‣ To be signed by an officer authorised in writing by such officer
• In case of applicant:
‣ To be signed in the specified manner

• Disposal of appeal by AAAR –

• AAAR shall pass order after hearing the parties to the appeal
• Within a period of 90 days of filing appeal

• Difference of opinion among AAAR members –

• If members differ on any point, it shall be deemed that no advance ruling can be issued in respect of the question
under appeal

• Scope of order by AAAR –

• The authority may confirm or modify the ruling appealed against
• Or referred to by AAR in case of difference in opinion

• Communication of ruling –
• A copy of advance ruling pronounced by AAAR:
‣ Signed by members
‣ Certified in prescribed manner
‣ Communicated to applicant, concerned officer, jurisdictional officers and to the AAR

7. RECTIFICATION OF MISTAKES [SECTION 102]

• Authority empowered –
• Both AAR and AAAR have the power to amend their order

• Purpose –
• To rectify any mistake apparent from the record

• Time limit –
• Rectification can be made within 6 months from the date of the order

• Initiation of rectification –
• Mistake may be noticed by the authority on its own (suo moto)
• OR may be brought to its notice by:
‣ The applicant
‣ The concerned officer
‣ The jurisdictional officer

• Condition when rectification affects applicant adversely –

• If rectification has effect of:
‣ Enhancing tax liability, OR
‣ Reducing the quantum of input tax credit,
→ Then the applicant must be heard before such order is passed

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8. APPLICABILITY OF ADVANCE RULING [SECTION 103]

• 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 the State.
➤ It is only limited to the person who has applied for an advance ruling.
• The law does not provide for a fixed time period for which the ruling shall apply.
➤ Instead, 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.

9. ADVANCE RULING TO BE VOID IN CERTAIN CIRCUMSTANCES [SECTION 104]

• Section 104 states the circumstances under which the ruling would be considered as void and hence would lose its
binding value.

• If the Authorities (AAR and Appellate Authority) find that the advance ruling pronounced has been obtained by the
applicant/appellant by fraud or suppression of material facts or misrepresentation of facts, it may, by order, declare
such ruling to be void ab-initio.

• Consequently, all the provisions of the CGST Act shall apply to the applicant as if such advance ruling had never
been made,
While computing period u/s 73/74/74A (but excluding the period when advance ruling was given and up to the period
when the order declaring it to be void is issued).

• An order declaring advance ruling to be void can be passed only after hearing the applicant / appellant.

• A copy of the order so made shall be sent to the applicant, the concerned officers and the jurisdictional officer.

10. POWERS AND PROCEDURE OF AAR AND AAAR [SECTION 105 AND 106]
• Both the AAR and AAAR are vested with the powers of a civil court under the Code of Civil Procedure, 1908, for
the purposes of:
o Discovery and inspection
o Enforcing the attendance of a person and examining him on oath
o Issuing commissions
o Compelling production of books of account and other records

• Both the authorities are deemed to be a civil court for the purposes of section 195 of the Code of Criminal
Procedure, 1973, however:
o They are not treated as civil court for the purpose of Chapter XXVI of the Code of Criminal Procedure,
1973

• Any proceeding before the authority shall be deemed to be judicial proceeding under:
o Section 193 and 228, and
o For the purpose of section 196 of the Indian Penal Code, 1860

• The AAR and AAAR also have the power to regulate their own procedure

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