Advance Ruling

Q 1. What is the meaning of Advance Ruling?

Ans. 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 as the case may be, in relation to
the supply of goods and/or services proposed to be
undertaken or being undertaken by the applicant.

Q 2. Which are the questions for which advance ruling can be sought?

Ans. Advance Ruling can be sought for the following
questions:

(a) classification of any goods or services or both;

(b) applicability of a notification issued under
provisions of the GST Act(s);

(c) determination of time and value of supply of
goods or services or both;

(d) admissibility of input tax credit of tax paid or
deemed to have been paid;

(e) determination of the liability to pay tax on any
goods or services under the Act;

(f) whether applicant is required to be registered
under the Act;

(g) whether any particular thing done by the
applicant with respect to any goods or services
amounts to or results in a supply of goods or
services, within the meaning of that term.

Q 3. What is the objective of having a mechanism of Advance Ruling?

Ans. The broad objective for setting up such an authority
is to:

i. provide certainty in tax liability in advance in
relation to an activity proposed to be undertaken
by the applicant;

ii. attract Foreign Direct Investment (FDI);

iii. reduce litigation;

iv. pronounce ruling expeditiously in transparent
and inexpensive manner.

Q 4. What will be the composition of Authority for advance rulings (AAR) under GST?

Ans. ‘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.

Q 5. Is it necessary for a person seeking advance ruling to be registered?

Ans. No, any person registered under the GST Act(s) or
desirous of obtaining registration can be an applicant.
(Section 95(b))

Q 6. At what time an application for advance ruling be made?

Ans. An applicant can apply for advance ruling even before
taking up a transaction (proposed supply of goods or
services) or in respect of a supply which is being
undertaken. The only restriction is that the question being
raised is already not pending or decided in any proceedings
in the case of applicant.

Q 7. In how much time will the Authority for Advance Rulings have to pronounce its ruling?

Ans. As per Section 98(6) of CGST/SGST Act, the Authority
shall pronounce its ruling in writing within ninety days
from the date of receipt of application.

Q 8. What is the Appellate authority for advance ruling (AAAR)?

Ans. 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.

Q 9. How many AAR and AAAR will be constituted under GST?

Ans. There will be one AAR and AAAR for each State.

Q 10. To whom will the Advance Ruling be applicable?

Ans. 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 jurisdictional tax authority of the
applicant. This clearly means that an advance ruling is
not applicable to similarly placed taxable persons in the
State. It is only limited to the person who has applied for
an advance ruling.

Q 11. Whether the advance ruling have precedent value of a judgment of the High Court or the Supreme Court?

Ans. No, the advance ruling is binding only in respect of
the matter referred. It has no precedent value. However,
even for persons other than applicant, it does have
persuasive value.

Q 12. What is the time period for applicability of Advance Ruling?

Ans. The law does not provide for a fixed time period
for which the ruling shall apply. Instead, in section
103 (2) , it is provided that advance ruling shall be
binding till the period when the law, facts or
circumstances supporting the original advance ruling
have changed. Thus, a ruling shall continue to be in force
so long as the transaction continues and so long as there is
no change in law, facts or circumstances.

Q 13. Can an advance ruling given be nullified?

Ans. Section 104(1) provides that an advance ruling shall
be held to be ab initio void if the AAR or AAAR finds that
the advance ruling was obtained by the applicant by fraud
or suppression of material facts or misrepresentation of facts.
In such a situation, all the provisions of the GST Act(s) shall
apply to the applicant as if such advance ruling had never
been made (but excluding the period when advance ruling
was given and up to the period when the order declaring it
to be void is issued). An order declaring advance ruling to be
void can be passed only after hearing the applicant.

Q 14. What is the procedure for obtaining Advance Ruling?

Ans. Section 97 and 98 deals with procedure for obtaining
advance ruling. Section 97 provides that the applicant
desirous of obtaining advance ruling should make
application to AAR in a prescribed form and manner. The
format of the form and the detailed procedure for making
application will be prescribed in the Rules.

Section 98 provides the procedure for dealing with the
application for advance ruling. The AAR shall send a copy
of application to the officer in whose jurisdiction the
applicant falls and call for all relevant records. The AAR
may then examine the application along with the records
and may also hear the applicant. Thereafter AAR will pass
an order either admitting or rejecting the application.

Q 15. Under what circumstances will the application for Advance Ruling be compulsorily rejected?

Ans. Application has to be rejected if the question raised
in the application is already pending or decided in any
proceedings in the case of applicant under any of the
provisions of GST Act(s)
If the application is rejected, it should be by way of a
speaking order giving the reasons for rejection.

Q 16. What is the procedure to be followed by AAR once the application is admitted?

Ans. If the application is admitted, the AAR shall
pronounce its ruling within ninety days of receipt of
application. Before giving its ruling, it shall examine the
application and any further material furnished by the
applicant or by the concerned departmental officer.

Before giving the ruling, AAR must hear the applicant or
his authorized representative as well as the jurisdictional
officers of CGST/SGST/UTGST.

Q 17. What happens if there is a difference of opinion amongst members of AAR?

Ans. If there is difference of opinion between the two
members of AAR, they shall refer the point or points on
which they differ to the AAAR for hearing the issue. If the
members of AAAR are also unable to come to a common
conclusion in regard to the point(s) referred to them by
AAR, then it shall be deemed that no advance ruling can be
given in respect of the question on which difference persists
at the level of AAAR.

Q 18. What are the provisions for appeals against order of AAR?

Ans. The provisions of appeal before AAAR are dealt in
section 100and 101 of CGST/SGST Act or section 14 of the
UTGST Act.

If the applicant is aggrieved with the finding of the AAR, he
can file an appeal with AAAR. Similarly, if the concerned
or jurisdictional officer of CGST/SGST/UTGST does not
agree with the finding of AAR, he can also file an appeal
with AAAR. The word concerned officer of CGST/SGST
means an officer who has been designated by the
CGST/SGST administration in regard to an application
for advance ruling. In normal circumstances, the
concerned officer will be the officer in whose jurisdiction
the applicant is located. In such cases the concerned
officer will be the jurisdictional CGST/SGST officer.

Any appeal must be filed within thirty days from the
receipt of the advance ruling. The appeal has to be in
prescribed form and has to be verified in prescribed
manner. This will be prescribed in the Model GST Rules.

The Appellate Authority must pass an order after hearing
the parties to the appeal within a period of ninety days of
the filing of an appeal. If members of AAAR differ on any
point referred to in appeal, it shall be deemed that no
advance ruling is issued in respect of the question under
appeal.

Q 19. Whether Appeal can be filed before High Court or Supreme Court against the ruling of Appellate Authority for Advance Rulings?

Ans The CGST /SGST Act do not provide for any appeal
against the ruling of Appellate Authority for Advance
Rulings. Thus no further appeals lie and the ruling shall be
binding on the applicant as well as the jurisdictional
officer in respect of applicant.
However, Writ Jurisdiction may lie before Hon’ble High
Court or the Supreme Court.

Q 20. Can the AAR & AAAR order for rectification of mistakes in the ruling?

Ans. Yes, AAR and AAAR have power to amend their
order to rectify any mistake apparent from the record
within a period of six months from the date of the order.
Such mistake may be noticed by the authority on its
own accord or may be brought to its notice by the
applicant or the concerned or the jurisdictional
CGST/SGST officer. If a rectification has the effect of
enhancing the tax liability or reducing the quantum of
input tax credit, the applicant or the appellant must be
heard before the order is passed. (Section 102)