Understanding the Appeal Process for Advance Rulings Under GST

Following our discussion on the fundamentals of advance rulings and the Authority for Advance Ruling, this article explores the appeal process to the Appellate Authority and other relevant aspects of advance rulings.

Recent legislative updates indicate that as of February 1st, 2021, a 25% penalty payment is required for filing appeal applications under Section 107 of the CGST Act concerning goods detention and seizure orders, though the effective date is pending notification. Additionally, an extension to June 30th, 2020, was granted for compliance deadlines initially falling between March 20th and June 29th, 2020. This extension covered various appeals, including those to the GST appellate authority, High Courts, and the Supreme Court.

The Goods and Services Tax (GST) framework introduces a novel provision for appealing advance rulings. Unlike the prior tax system, which only permitted appeals through a special High Court dispensation, GST now simplifies this by enabling appeals directly to the Appellate Authority.

Appealing to the Appellate Authority for Advance Rulings in GST

The Advance Ruling Appeal Process Under GST

Both the applicant and any aggrieved officer possess the right to appeal an advance ruling to the Appellate Authority. Such appeals must be submitted within 30 days of the ruling's date, with a possible extension of an additional 30 days.

Required Forms for Appeal

Applicants appealing an advance ruling must use FORM GST ARA-02 and pay a fee of Rs. 10,000. Conversely, a GST tax officer filing an appeal utilizes FORM GST ARA-03, for which no fee is required.

Appellate Authority's Decision

The Appellate Authority holds the power to either uphold or alter the challenged ruling, with a decision expected within 90 days of the appeal application. Should the Appellate Authority members have differing opinions on a matter, an advance ruling cannot be issued. A signed copy of the final advance ruling is then dispatched to the applicant, the relevant CGST / SGST officer, and the Authority.

Correcting an Advance Ruling

Within six months of the order's date, either the Authority or the Appellate Authority can amend their own ruling to correct any obvious errors. This rectification can be initiated by the Authority, the Appellate Authority itself, the jurisdictional CGST/SGST officer, or the applicant. Any correction that would increase tax liability or reduce input tax credit, thereby negatively impacting the applicant, will only be executed after providing due notice and an opportunity for the applicant to be heard.

Scope of Advance Ruling

An advance ruling is legally binding solely on the applicant and the relevant jurisdictional tax authorities concerning that applicant. However, if the underlying legal provisions or factual circumstances of the original ruling are altered, the advance ruling ceases to be applicable.

Grounds for Voiding an Advance Ruling

Should an advance ruling be acquired through fraudulent means or by concealing essential facts, the Authority or Appellate Authority will declare it void from its inception (ab initio). In such cases, all standard GST provisions will apply to the applicant as if no advance ruling had ever existed, though the applicant will be granted an opportunity to present their case.

Authority and Appellate Authority Powers

Both the Authority and the Appellate Authority are vested with powers akin to a civil court under the Code of Civil Procedure. These powers include discovery and inspection, compelling witness attendance and testimony under oath, and conducting investigations to enforce the production of documents and records. All proceedings conducted before these authorities are considered judicial proceedings.

Procedural Guidelines for Authorities

The Authority and the Appellate Authority are empowered to establish their own procedural rules for all matters pertinent to the exercise of their designated powers.

Further Appeal Options After Appellate Authority Decision

The GST Act does not explicitly outline a procedure for challenging decisions made by the Appellate Authority. Consequently, it is anticipated that the approach will mirror the previous tax regime, allowing individuals to appeal Appellate Authority decisions to a Division Bench of the High Court via a special dispensation, as established by the Supreme Court in the Colombia Sportswear Company vs. Director of Income Tax, Bangalore-2012 case.

Concluding Thoughts

Under previous tax laws, taxpayers could often refer to established legal precedents. However, with the introduction of GST, which is a relatively new system, obtaining advance tax rulings becomes crucial for guidance on specific transactions. Despite their utility, advance rulings under GST might inadvertently broaden the interpretative scope of certain issues. Discrepancies in interpretations among different jurisdictional tax authorities could lead to disputes, potentially negating the benefits of advance rulings. The absence of historical case law leaves room for varied interpretations, which could result in more appeals and subsequent legislative adjustments, thereby diminishing the intended advantages of advance rulings. The ultimate impact of advance rulings on reducing GST-related legal disputes remains to be seen.