Advance Ruling under GST

Advance Ruling under GST

A letter ruling is a written statement issued to a taxpayer by tax authorities that interprets and applies the tax law to a specific set of facts and an advance ruling is the written statement for interpretation of tax laws. It is issued to applicants when the tax payer is in doubt with regards to provisions of laws.

As per section 95 of CGST / SGST Law and section 12 of UTGST law, ‘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 100(1) of CGST / SGST Act in relation to the supply of goods and / or services proposed to be undertaken or being undertaken by the applicant.

Advantages of Advance Ruling 
Below mentioned are some advantages of advance ruling:

  • Reduced litigation cost
  • Provides clarity regarding the provisions of law
  • Attracts foreign investment

When can a Taxpayer make an application for Advance Ruling?
As per Section 97(2) of CGST / SGST Act or 100(1), the application for advance ruling can be made for following:

  • Classification of goods or services or both;
  • Admissibility of input of tax paid or deemed to be paid;
  • Determination of the liability to pay tax on goods or services or both;
  • Whether applicant is required to be registered;
  • Applicability of a notification issued under the provisions of this Act;
  • Determination of time and value of supply of goods or services or both; and
  • 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.

Whether a person desirous of making application for advance ruling needs to be registered?
Any person registered under the GST Act(s) or is in a process of or desirous of obtaining registration can be an applicant. Since the portal offers this facility without any requirement of regular logins (As per Section 95(b)).

Restriction on making advance ruling application
The only restriction for making an advance ruling is that the question being raised shall not be pending or has been decided in any proceedings of the case.

Authority for Advance Ruling
Authority for advance ruling’ (AAR) shall comprise one member CGST and one member SGST / UTGST. They will be appointed by the Central and State government respectively.

Time Limit to Pronounce the Advance Ruling
As per Section 98(6) of CGST / SGST Act, within 90 days from the date of receipt of application, the Authority shall pronounce its ruling in writing.

Appellate Authority for Advance Ruling
Appellate authority for advance ruling (AAAR) shall be constituted under the SGST Act or UTGST Act and such AAAR shall be deemed to be the Appellate Authority under the CGST Act in respect of the respective state or Union Territory. An applicant or the jurisdictional officer, if aggrieved by any advance ruling, may appeal to the Appellate Authority.

How many AAR and AAAR will be constituted?
There will be one AAR and AAAR for each State.

Applicability of Advance Ruling
Section 103 provides that an advance ruling pronounced by AAR or AAAR shall be binding only on the applicant who sought it in respect of any matter referred to in 97(2) and on the respective jurisdictional tax authority. Thus, this clearly states that an advance ruling is not applicable to similarly placed taxable persons in the State, and is only limited to the person who has applied for an advance ruling.

If you are looking for any assistance regarding the applicability of the rulings for any assessment, our team of experts can assist you for the same.

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