Understanding the Advance Ruling Mechanism in GST

The introduction of GST provisions often presents complexities for businesses, necessitating a mechanism like advance ruling to provide clarity.

What is an Advance Ruling?

An advance tax ruling offers a formal written interpretation of tax laws. Tax authorities issue these rulings to businesses and individuals seeking clarification on specific tax issues, particularly when uncertainty exists regarding particular provisions. Typically, taxpayers apply for an advance ruling prior to commencing a proposed activity.

For instance, under income tax, advance rulings are utilized in international taxation to assist non-residents in determining their income-tax obligations, facilitating proactive tax planning, and preventing protracted legal disputes. Within the context of GST, an advance ruling constitutes a formal written decision issued by tax authorities to an applicant concerning matters related to the supply of goods or services.

Why is Advance Ruling under GST Necessary?

The primary goals of any advance ruling, including those under GST, are as follows:

• To offer certainty regarding future tax liabilities for prospective business activities.
• To encourage Foreign Direct Investment (FDI) by presenting a transparent view of future tax obligations, thereby appealing to non-residents seeking to avoid complex tax conflicts.
• To minimize legal proceedings and expensive tax disputes.
• To deliver rulings in an efficient, clear, and cost-effective manner.

When can one Request for GST Advance Ruling?

Taxpayers may seek an advance ruling when ambiguities exist concerning GST provisions. An advance tax ruling can be applied for in relation to:

• The classification of goods or services under the Act.
• The relevance of a notification impacting tax rates.
• The calculation of the time and value of supply for goods or services.
• The eligibility of input tax credit, whether paid or deemed to be paid.
• The obligation to pay tax on specific goods or services.
• The requirement for the applicant to register under GST.
• Whether any action undertaken by the applicant concerning goods or services qualifies as a 'supply'.

Procedure on Receipt of Application

Upon receiving an application, a duplicate is sent to the designated officer, who is then responsible for providing all pertinent records.

Process of Advance Ruling under GST

Initially, an advance ruling request is submitted to the Authority for Advance Ruling (referred to as 'the Authority'). If an individual is dissatisfied with the Authority's decision, they have the option to appeal to the Appellate Authority for Advance Ruling (referred to as 'the Appellate Authority').

Forms

The application for an advance ruling must be filed using FORM GST ARA-01 and accompanied by a fee of Rs. 5,000.

Decision of the Authority

The Authority holds the power to either accept or dismiss the application through an official order.

Will all Applications be Allowed?

The Authority will decline an application if:

• The specific issue has already been ruled upon in a previous case involving the same applicant.
• The identical matter is currently under consideration in any ongoing legal proceedings pertaining to the applicant.

In essence, an advance ruling cannot be obtained for any matter that is either currently pending resolution or has already received a decision.

Applications will only be rejected after the applicant has been granted an opportunity to present their case, and the grounds for rejection must be provided in writing.

When will the Authority Give their Decision?

A decision on the advance ruling is expected within 90 days of the application submission. Should the Authority's members hold differing opinions on a particular aspect, they will escalate that point to the Appellate Authority.

An advance ruling is effective only for future applications.

On Whom will the Advance Ruling Apply?

The advance ruling is legally binding solely on: a) the applicant, and b) the relevant jurisdictional tax authorities concerning that applicant. If there are changes to the underlying law or facts of the original advance ruling, the ruling will no longer be applicable.

Appeal to the Appellate Authority

Should the applicant be dissatisfied with the advance ruling, an appeal can be filed with the Appellate Authority.