Advance Ruling’ is a decision provided by the Authority for Advance Ruling (AAR) or the Appellate Authority for Advance Ruling (AAAR) to an applicant on specified matters or questions, in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant.
It is important to note here that an applicant may seek advance ruling not only on those supplies that are proposed to be undertaken but also those supplies which have already been undertaken.
‘Applicant’ is any person registered or desirous of obtaining registration under GST.
It may be noted here that the application for advance ruling does not require the applicant to be registered. It is for this reason that the GST Portal offers the facility to file the application without regular login for taxpayers.
The law provides an exhaustive list of issues on which an Advance Ruling may be sought by an applicant:
1. classification of any goods or services or both
2. applicability of a notification issued under the GST Law
3. determination of time of supply of goods or services or both
4. determination of the value of supply of goods or services or both
5. admissibility of input tax credit
6. determination of the liability to pay tax on any goods or services or both
7. whether the applicant is required to be registered
8. Whether any transaction amounts to or results in a supply of goods or services or both.
Thus, the questions for which an advance ruling may be obtained are categorically prescribed and no queries other than these would be entertained for advance rulings. For example, determination of place of supply or location of the supplier are contentious issues and have a direct bearing on the nature of tax to be paid, and the State to which such revenue would accrue. However, no advance ruling can be sought for the same.
Though the law is not very clear on this aspect, it can be conclusively determined from the format of the form of application Form GST ARA-01 that multiple questions can be raised in a single application.
As a general practice, the applicant files a single application pertaining to a particular line of business, and all questions relating to the same are stated in such application. In case such an applicant wishes to seek an advance ruling in respect of a different business vertical, a separate application is filed.
An advance ruling is binding only on the applicant who had sought it in respect of any matter and on the concerned officer or the jurisdictional officer in respect of that applicant. This means that an advance ruling shall not be binding on any taxpayer other than the applicant, even if the nature of business happens to be exactly the same. Further, it could also be that there are conflicting advance rulings on the same issue in respect of different applicants.
Also, the advance ruling shall be binding on the officer in respect of that applicant only. It also means that though the orders of the advance ruling are available to the general public, they cannot be used as precedents in the court of law. However, a reasoned ruling will surely have persuasive value.
AARs are the authority that delivers decisions on questions sought by applicants under Advance Ruling. The AARs are constituted under the provisions of State GST Acts and UTGST Act, which are deemed to be the Authority for Advance Ruling for the purpose of CGST Act too.
Though it is clear that there is a single AAR for an applicant in respect of both the Central and the State GST Law, however, it is ambiguous as to whether the applicant is required to file separate applications under the two sets of laws. In practice, the applicants prefer a single application with their jurisdictional AAR with payment of the required fees of ₹ 5000/- under both State GST Act as well as CGST Act, i.e. a total fee of ₹ 10,000/-.
The Government appoints officers, not below the rank of Joint Commissioner as members of AAR. It is important to note here that the AAR consists of no judicial member, which questions the independence and objectivity of the AAR.
On receipt of the application, the AAR shall cause a copy thereof to be forwarded to the concerned officer and, if necessary call upon him to furnish the relevant records.
1. After examining the application and the records called for and after hearing the applicant or his authorized representative and the concerned officer or his authorized representative, the AAR may by order, either admit or reject the application. The Authority shall not admit the application where the question raised is already pending or decided in any proceedings. An opportunity of being heard shall be given to the applicant before rejecting the application.
2. Where the application is admitted, the AAR shall pronounce its ruling after examining any further material and after providing an opportunity of being heard to the applicant as well as to the concerned officer. The ruling shall be pronounced in writing within 90 days from the date of receipt of the application.
3. A copy of the advance ruling shall be sent to the applicant, the concerned officer, and the jurisdictional officer after such pronouncement.
An appeal mechanism has been constituted by way of the constitution of AAAR. The AAARs have also been constituted under the provisions of State GST Acts and UTGST Act, which are deemed to be the AAAR for the purpose of CGST Act too.
AAAR can be approached by the following:
1. By the members of the AAR: Where the members of the Authority differ on any question on which the advance ruling is sought, they shall state the point or points on which they differ and make a reference to the Appellate Authority for hearing and decision of such question.
2. The concerned officer or the jurisdictional officer: The concerned or jurisdictional officer aggrieved by any advance ruling pronounced by the AAR may appeal to AAAR.
3. The applicant: The applicant aggrieved by any advance ruling pronounced by the AAR may appeal to AAAR.
In such cases, it shall be deemed that no advance ruling can be issued in respect of the question under the appeal or reference.
This provision leads to a dead-end and renders the mechanism of advance ruling useless in questions where the members of AAAR are divided. However, the applicant may escalate the issue by preferring a writ before the jurisdictional High Court, if he does not wish to continue with uncertainty.
No further appeal mechanism has been provided in GST Law. However, the applicant may prefer writ before the jurisdictional High Court.
The appeal is required to be filed within a period of 30 days from the date on which the ruling sought to be appealed against is communicated to the concerned officer, the jurisdictional officer, and the applicant.
This means that the period of 30 days shall be counted from the latest date on which the advance ruling was received by the abovementioned three parties.
Nonetheless, the AAAR is empowered to condone the delay if sufficient cause for the same is demonstrated.