Advance tax ruling is an interpretation of law in the written format. In the previous tax regime, advance ruling was available only to specific people. But under GST, advance ruling facility is available for registered and unregistered people. Under the GST regime, advance rules are clearly-written decisions provided by tax officials. In other words. advancing ruling provides solutions to common taxpayer problems. Since GST is fairly new, taxpayers will need clarifications. So, taxpayers have to apply for advance ruling before starting the proposed activity.

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Why is Advance Ruling under GST necessary?

The aim of advance ruling is to:

  • Prepare taxpayer for future GST liability
  • Reduce legal action and costly legal conflicts
  • Give quick and transparent decisions in a low-cost manner.
  • Attract Foreign Direct Investment (FDI)
    • The transparency will attract non-residents who don’t want to get involved in tax disputes.

When can one seek Advance Ruling?

Advance ruling can be sought in the following cases:

  • Determining whether input tax credit is allowed
  • Classifying goods and/or services
  • Determining the liability to pay GST on any goods or services
  • Applicability of a notification issued under GST
  • Determining the time and value of a supply of goods and/or services
  • Possibility of the applicant being registered under GST
  • Lastly, determining whether an activity will lead to supply of goods or services

Process

  • Taxpayer should give an application form with the necessary financial records.
  • Tax official may accept or reject the application.
  • The registered taxpayer will get the decision within 90 days from the date of receipt of application.

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Procedure on receipt of application

There will be one authority for Advance Ruling (AAR) in every state. It will have one CGST member and one member appointed by the Center and the State respectively. 

  • Once a taxpayer submits the application, the concerned officer will receive the application’s copy. Then, he will provide the necessary relevant records. Though there was notification that the application filing is online, the facility is not available yet. Hence, appellants have to submit the form manually.
  • The Authority can, by order, either admit or reject the application.
  • A taxpayer will get the advance ruling decision within 90 days from application.
  • There might also be instances when the members of the Authority differ in opinion. Therefore, in such a situation, they will refer the point to the Appellate Authority.

Admission/Rejection of Application:

The Authority will NOT admit the application if the same matter-

  • has already been decided in an earlier case for the applicant, or
  • is already pending in any proceedings for the applicant.

Advance ruling under GST

 

However, the authority can reject an application

only after hearing the applicant. 

If the authority rejects an application,

it will given the reasons for rejection in writing.

 

On whom will the Advance Ruling under GST apply?

The advance ruling will be binding only on the–
(a) Applicant 
(b) Jurisdictional tax authorities.

In conclusion, a taxpayer can obtain advance ruling on a proposed transaction as well as a transaction that the appellant has already undertaken. In this manner, a taxpayer can avoid costly litigation.

 

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