ADVANCE RULING
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Learning Outcome
• Concept of advance ruling under GST
• Why is advance ruling under GST necessary?
• When can one request for GST Advance Ruling?
• Process of Advance Ruling under GST
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What is advance ruling?
• Any advance tax ruling is a written interpretation of tax laws. It is issued by tax
authorities to corporations and individuals who request for clarification of certain
tax matters. An advance ruling is often requested when the taxpayer is confused
and uncertain about certain provisions. Advance tax ruling is applied for: before
starting the proposed activity.
• For example, under income tax, advance ruling is available in international
taxation. This is to help non-residents ascertain the income-tax liability, plan their
income-tax in advance and avoid long drawn and costly legal disputes.
• As per GST, the advance ruling is a written decision given by the tax authorities to
an applicant on questions relating to the supply of goods/services.
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AIM of Advance Ruling
The aim is to provide certainty to the tax payer with respect to
his obligations under the GST Act and an expeditious ruling,
so that the relationship between the tax payer and
administration is smooth and transparent and helps to avoid
unnecessary litigation
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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
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“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 subsection (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.
under GST, Advance ruling can be obtained on a proposed
transaction as well as a transaction already undertaken by the
appellant.
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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 –
• Classification of any goods and/or services under the Act
• Applicability of a notification which affects the rate of tax
• Determination of time and value of supply of goods/services
• Whether input tax credit paid (or deemed to be paid) will be allowed
• Determination of the liability to pay tax on any goods/services
• Whether the applicant has to be registered under GST
• RCM/FCM ( Who is liable to pay tax)
• Whether any particular thing done by the applicant regarding goods/services will
result in a supply.
• But not for Place of Supply (POS)
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Procedure on receipt of application
On receipt of an application, a copy will be
forwarded to the prescribed officer and he will
furnish the necessary relevant records.
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Process of Advance Ruling under GST
An advance ruling is first sent to
Authority for Advance Ruling (Authority).
Any person unhappy can make a appeal to
Appellate Authority for Advance Ruling
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Advance Ruling under GST
Forms
Application for Advance ruling has to be made in FORM GST ARA-01 along
with Rs. 5,000 ( CGST & SGST) .
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-
• The same matter has already been decided in an earlier case for the
applicant
• The same matter is already pending in any proceedings for the applicant
Basically, Advance Ruling will not be possible in any pending case or any
decision already given.
Applications will be rejected only after giving an
opportunity of being
heard. Reasons for rejection shall be given in writing.
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Advance Ruling under GST
When will the authority give their decision?
Advance ruling decision will be given within from
90 days 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 –
• On the applicant
• 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.
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Appeals against order of AAR
Applicant Happy
with Judgment
of AAR
Yes No
GST Department
Satisfied GST Department Can Appeal to
Not Satisfied AAAR
Can Appeal to
Yes
AAAR
Case Ended (
Judgment will
be followed )
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Appeals against order of AAR
If the applicant is aggrieved with the finding of the AAR, he can file an appeal with AAAR.
Any appeal must be filed within thirty days from the receipt of the advance ruling. The
appeal has to be in prescribed form and has to be verified in prescribed manner.
The Appellate Authority must pass an order after hearing the parties to the appeal within a
period of ninety days of the filing of an appeal.
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.
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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 three years in
the rank of Joint Commissioner as member of
the Authority for Advance Ruling.
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Is it necessary for a person seeking advance ruling to be
registered?
• No, any person registered under the GST
Act(s) or desirous of obtaining registration can
be an applicant. (Section 95(b))
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At what time an application for
advance ruling be made?
• 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.
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What is the time period for
applicability of Advance Ruling?
• The law does not provide for a fixed time
period for which the ruling shall apply.
Instead, in section 103 (2) , it is provided that
advance ruling shall be binding till the period
when the law, facts or circumstances
supporting the original advance ruling have
changed. Thus, a ruling shall continue to be in
force so long as the transaction continues and
so long as there is no change in law, facts or
circumstances.
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Can an advance ruling given be
nullified?
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.
• In such a situation, all the provisions of the
GST Act(s) shall apply to the applicant as if
such advance ruling had never been made.
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What happens if there is a difference
of opinion amongst members of AAR?
• f there is 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.
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Links to Advance Ruling Cases
• [Link]
advance-rulings
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Advance Ruling under GST
Appeal to the Appellate Authority
• If the applicant aggrieved by the advance ruling he
can appeal to the Appellate Authority.
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Rectification of Mistakes
The law gives power to AAR and AAAR to amend their order to rectify any mistake
apparent from the record 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 prescribed 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.
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Questions
As per section 245N(a), advance ruling in case of a non-resident means a
determination by the Authority in relation to a transaction which has been undertaken or
is proposed to be undertaken by a non-resident applicant. Such determination shall
include the determination of any question of law or of fact specified in the application.
True
False
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An application for advance ruling cannot be made by the applicant who is non-
resident.
True
False
The fee for application for advance ruling is Rs. 10,000 in all cases.
(a) True (b) False
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Q1. What is the meaning of applicant?
• Person registered under the Act.
• (b) Person desirous of obtaining registration under the Act.
• (c) Tourist as defined under section 15 of IGST Act, 2017.
• (a) or (b).
Where shall the Advance Ruling Authority be located?
(a) The Authority shall be located in each state / Union Territory.
(b) The Authority shall be located in Centre.
(c) The Authority shall be located in both Centre & State.
(d) None of the above
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Who shall make an application for advance ruling?
• Applicant
• (b) Department
• (c) Appellate Authority
• (d) None of the above
What procedure should follow if the members of the Authority differ on any question on
which the advance ruling is sought?
• The members of the authority shall state the point or points on which they differ and
make a reference to the Appellate Authority for hearing and decision on such question.
• (b) The Authority will not take any decision and reject the application
• (c) The Authority will remand the case to jurisdictional officer
• (d) None of the above
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Within how many days the Authority shall pronounce its decision on advance ruling from
the date of receipt of application (a) 30 days (b) 60 days (c) 90 days (d) 120 days
Whether the ruling pronounced under Section 98 of CGST Act, 2017 have prospective or
retrospective effect?
• Prospective effect
• (b) Retrospective effect
• (c) Prospective/Retrospective effect based on case to case
Appeal before the appellate authority can be filed within how many days?
(a) 30 days (b) 60 days (c) 90 days (d) 120 days
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Who can apply for rectification of error on record?
• Applicant
(b) Concerned officer or Jurisdictional Officer
(c) Advance Ruling Authority or the Appellate Authority on its own accord can rectify the
error
(d) All of the above
When should the opportunity of being heard be given to applicant or the appellant for
rectification of advance ruling?
• If the rectification has the effect of enhancing the tax liability.
(b) If the rectification has the effect of reducing the amount of admissible input tax credit.
(c) (a) or (b)
(d) None of the above
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When can the Authority declare the advance ruling pronounced as void?
(a) If ruling is obtained by suppression of material facts
(b) If the applicant is in the business of supplies on which clarification has been sought
(c) If the applicant does not engage in the business of supplies after 6 months of obtaining
the ruling
(d) If a Supreme Court judgement is pronounced on the same issue and the judgement is
exactly the opposite of the clarification issued under the ruling
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References
Textbook : GST Goods & Services Tax , Maximax Publications , Dr.
Girish Ahuja and Dr. Ravi Gupta
[Link]
E Content : Issued by Indirect Taxes Committee , June 2017
Website used :[Link]; [Link]
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