ADVANCE RULING MECHANISM UNDER GST LAWS

[Mr. M. GOVINDARAJAN]

Introduction

The concept of advance ruling was introduced in the Income Tax Act, 1961 through Finance Act, 1993 with effect from 01.06.1993.  Section 245N(a) of the Income Tax Act, 1961 defines the expression ‘advance ruling’ as written opinion or authoritative decision by an Authority empowered to render it with regard to the tax consequences of a transaction or proposed transaction or an assessment in regard thereto.  Initially the advance ruling under Income Tax Act, 1961 was applicable only to nonresident.   Then it extended to residents in certain categories and notified public sector undertakings.  The advance ruling was later extended to Customs, Central Excise, Service Tax, and State Value Added Tax Acts.    With effect from 01.07.2017 the indirect taxes, except customs, were subsumed and GST regime started.  Advance ruling finds place in GST laws also.

Advance ruling under GST laws

Chapter XVII of the Central Goods and Services Tax Act, 2017 (‘Act’ for short) and corresponding State Goods and Services Tax Acts provide the procedure for getting advance ruling under GST laws from the Authority for Advance Ruling on the questions enunciated under section 97(2) of the Act.  The provisions relating to Advance Ruling came into effect from 01.07.2017 vide Notification No. 09/2017-Central Tax, dated 28.06.2017.  Rule 103 to 107 of Chapter XII of Central Goods and Services Tax Rules, 2017 provides the practical aspect of obtaining advance ruling.  These provisions came into effect from 01.07.2017, vide Notification No. 10/2017- Central Tax, dated 28.06.2017.

Objectives

The broad objectives for setting up a mechanism of Advance Ruling are-

• to provide certainty in tax liability in advance in relation to an activity proposed to be undertaken by the applicant;
• to reduce litigation; and
• to pronounce ruling expeditiously in a transparent and inexpensive manner.

Questions on which Advance Ruling can be sought

Section 97(2) provides that the question on which the advance ruling is sought under this Act, shall be in respect of-

1. classification of any goods or services or both;
2. applicability of a notification issued under the provisions of this Act;
3. determination of time and value of supply of goods or services or both;
4. admissibility of input tax credit of tax paid or deemed to have been paid;
5. determination of the liability to pay tax on any goods or services or both;
6. whether applicant is required to be registered;
7. 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.

If the question sought for an advance ruling in the application does not fall within the ambit of section 97(2), then the Authority for Advance Ruling will reject the application filed by the applicant.

Authorities for Advance Ruling

The Authorities prescribed for the purpose of advance ruling are-

• Authority for Advance Ruling;
• Appellate Authority for Advance Ruling;
• National Appellate Authority for Advance Ruling (to be constituted by the Central Government, vide Finance (No.2) Act, 2019 the provisions of which are yet to be notified by the Central Government.)

There is no separate Authority for Advance Ruling and Appellate Authority for Advance Ruling for Central Goods and Services Tax Act, 2017. 

Authority for Advance Ruling

Section 96 of the Act provides that the Authority for advance ruling constituted under the provisions of a State Goods and Services Tax Act or Union Territory Goods and Services Tax Act shall be deemed to be the Authority for advance ruling in respect of that State or Union territory.

Each State/Union Territory has its own Authority for Advance Ruling.  Rule 103 provides that the Government shall appoint officers not below the rank of Joint Commissioner as member of the Authority for Advance Ruling. The details of the Members of Authorities for Advance Ruling, office address and phone number, email number etc., could be obtained in http://gstcouncil.gov.in/sites/default/files/Details-of-AAR-30-07-2020.pdf  

The details of receipt of applications for advance ruling up to June, 2020, number of applications disposed and the balance applications pending as on 30.06.2020 are shown in the following Table-

DETAILS OF APPLICATIONS RECEIVED, DISPOSED AND BALANCE

Sl. No.	Name of State/Union Territory	Applications received up to June 2020	Applications disposed up to June 2020	Balance as on 30.06.2020
1	Andhra Pradesh	100	83	17
2	Bihar	8	6	2
3	Chhattisgarh	22	17	5
4	Delhi	111	19	92
5	Goa	18	18	0
6	Gujarat	196	77	119
7	Haryana	40	19	21
8	Himachal Pradesh	3	2	1
9	Jharkhand	6	0	6
10	Karnataka	209	196	13
11	Kerala	19	15	4
12	Madhya Pradesh	47	38	09
13	Maharashtra	283	219	64
14	Nagaland	2	1	1
15	Odisha	8	8	0
16	Punjab	30	10	20
17	Rajasthan	86	81	5
18	Tamil Nadu	119	99	20
19	Telangana	15	15	0
20	Tripura	1	1	0
21	Uttar Pradesh	12	12	0
22	Uttarakhand	34	30	4
23	West Bengal	103	98	4
24	Daman & Diu	10	9	1
TOTAL		1482	1074	408

Source:http://gstcouncil.gov.in/mis-advance-ruling-aar

Appellate Authority for Advance Ruling

Section 99 of the Act provides that the Appellate Authority for Advance Ruling constituted under the provisions of a State Goods and Services Tax Act or a Union Territory Goods and Services Tax Act shall be deemed to be the Appellate Authority in respect of that State or Union territory.

Each State/Union Territory has its own Appellate Authority for Advance Ruling in which the Commissioner of the Central Tax and the Chief Commissioner of the State/Union territory tax shall be the Members.   The details of Authorities for Advance Ruling, office address and phone number, email number etc., could be obtained in http://gstcouncil.gov.in/sites/default/files/Details-of-AAAR-24-02-2020.pdf. 

The details of appeals received by the respective Appellate Authorities for Advance Ruling, disposed appeals and pending appeals as on 30.06.2020 are given in the following Table-

DETAILS OF APPEALS RECEIVED, DISPOSED AND BALANCE

Sl. No.	Name of State	Appeals received as on 30.06.2020	Appeals disposed as on 30.06.2020	Balance as on 30.06.2020
1	Chhattisgarh	2	2	0
2	Gujarat	11	7	4
3	Haryana	4	2	2
4	Karnataka	37	25	12
5	Kerala	12	8	4
6	Madhya Pradesh	8	6	2
7	Maharashtra	64	62	2
8	Odisha	9	8	1
9	Rajasthan	14	12	2
10	Tamil Nadu	6	3	3
11	Telangana	3	3	0
12	Tiripura	1	0	1
11	Uttarakhand	3	3	0
12	West Bengal	26	25	1
TOTAL		200	170	30

Source: http://gstcouncil.gov.in/mis-appeal-orders-aaar

National Appellate Authority for Advance Ruling

Where, in respect of the questions referred conflicting Advance Rulings are given by the Appellate Authorities of two or more States or Union territories or both any officer authorized by the Commissioner or an applicant, being distinct person referred to in section 25 aggrieved by such Advance Ruling, may prefer an appeal to National Appellate Authority to resolve the conflicting rules.

Powers of Authorities

The Authority or the Appellate Authority or the National Appellate Authority shall, for the purpose of exercising its powers regarding-

• discovery and inspection;
• enforcing the attendance of any person and examining him on oath;
• issuing commissions and compelling production of books of account and other records,

have all the powers of a civil court under the Code of Civil Procedure, 1908.

The Authority or the Appellate Authority or the National Appellate Authority shall, subject to the provisions of this Chapter, have power to regulate its own procedure.

Procedure before Authority for Advance Ruling

The following is the procedure to be adopted in getting advance ruling from the Authority for Advance Ruling-

• An applicant desirous of obtaining an advance ruling shall make on the common portal in FORM GST ARA-01 stating the question on which the advance ruling is sought.

• Even an unregistered person may also seek advance ruling for which a separate procedure is there.

• Fee payable shall be ₹ 10,000/- (₹ 5,000/- for CGST + ₹ 5,000/- for SGST).  The fee may be paid by a person by internet banking or by using credit or debit cards or National Electronic Fund Transfer or Real Time Gross Settlement or by such other mode and subject to such conditions and restrictions as may be prescribed, shall be credited to the electronic cash ledger of such person to be maintained in such manner as may be prescribed.

• The application, the verification contained therein and all the relevant documents accompanying such application shall be signed in the manner specified in rule 26.
• On receipt of an application, the Authority shall cause a copy thereof to be forwarded to the concerned officer and, if necessary, call upon him to furnish the relevant records.
• Where any records have been called for by the Authority in any case, such records shall, as soon as possible, be returned to the said concerned officer.
• The Authority may, 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, by order, either admit or reject the application.
• The Authority shall not admit the application where the question raised in the application is already pending or decided in any proceedings in the case of an applicant under any of the provisions of this Act.
• No application shall be rejected under this sub-section unless an opportunity of hearing has been given to the applicant:
• Where the application is rejected, the reasons for such rejection shall be specified in the order.
• A copy of every order (admission/rejection) shall be sent to the applicant and to the concerned officer.
• Where an application is admitted, the Authority shall, after examining such further material as may be placed before it by the applicant or obtained by the Authority and after providing an opportunity of being heard to the applicant or his authorized representative as well as to the concerned officer or his authorized representative, pronounce its advance ruling on the question specified in the application.
• The Authority shall pronounce its advance ruling in writing within 90 days from the date of receipt of application.
• Adjournments are generally given by the Authority.  If the adjournment sought cause the delay to dispose the application beyond 90 days then such adjournment request will be rejected by the Authority.
• A copy of the advance ruling pronounced by the Authority duly signed by the members and certified in such manner as may be prescribed shall be sent to the applicant, the concerned officer and the jurisdictional officer after such pronouncement.

The applications for seeking advance ruling are sought mainly on the following subject matters-

• Supply;
• Consideration;
• Composite supply;
• Mixed supply;
• Works Contract;
• Liability to pay tax;
• Reverse charge mechanism;
• Registration;
• Classification of goods and rate of tax;
• Classification of services and rate of tax;
• Exemption;
• Concessional Rate of tax;
• Time of supply;’
• Valuation;
• Input tax credit;
• Job work;
• Interpretation;
• Pure services.

Reference to Appellate Authority  

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 on such question.  The Appellate Authority may, after giving the parties to the reference an opportunity of being heard, pass such order as it thinks fit, confirming or modifying the ruling referred to.   The order shall be passed within a period of 90 days from the date of a reference.                       

Where the members of the Appellate Authority differ on any point or points referred to in reference, it shall be deemed that no advance ruling can be issued in respect of the question under the appeal or reference.

Appeal to Appellate Authority

• Section 100 of the Act provides that the  the concerned officer, the jurisdictional officer or an applicant aggrieved by any advance ruling pronounced under sub-section (4) of section 98, may appeal to the Appellate Authority. 
• Every appeal under this section shall 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.
• An appeal against the advance ruling shall be made by an applicant on the common portal in FORM GST ARA-02.
• Fee to be paid for an appeal is ₹ 10,000/-
• An appeal against the advance ruling shall be made by the concerned officer or the jurisdictional officer on the common portal in FORM GST ARA-03.
• No fee shall be payable by the said officer for filing the appeal.
•  The appeal, the verification contained therein and all the relevant documents accompanying such appeal shall be signed,-

•  in the case of the concerned officer or jurisdictional officer, by an officer authorized in writing by such officer; and
• in the case of an applicant in the manner specified in rule 26.

• A copy of the advance ruling pronounced by the Appellate Authority for Advance Ruling and duly signed by the Members shall be sent to-

• the applicant and the appellant;
• the concerned officer of central tax and State or Union territory tax;
• the jurisdictional officer of central tax and State or Union territory tax; and
• the Authority for Advance Ruling.

Condonation of delay

The Appellate Authority may, if it is satisfied that the appellant was prevented by a sufficient cause from presenting the appeal within the said period of thirty days, allow it to be presented within a further period not exceeding thirty days.

In the earlier period the Appellate Authorities condoned the delay since the Act is a new one and there might be confusions in the implementation of the law.  The Appellate Authority for Advance Ruling can condone the delay within 30 days, the extended period of limitation.  There is no power to condone the delay for the period beyond 60 days (30 days for filing appeal + 30 days extended period) in the provisions of CGST Act by the Appellate Authority for Advance Ruling.

Rectification of advance ruling

Section 102 of the Act provides that-

• The Authority for Advance Ruling; or
•  the Appellate Authority for Advance Ruling; or
• the National Appellate Authority for Advance Ruling

 may amend any order passed by it  so as to rectify any error apparent on the face of the record, if such error is noticed by the concerned Authority on its own accord, or is brought to its notice by the concerned officer, the jurisdictional officer, the applicant, appellant, the Authority or the Appellate Authority within a period of six months from the date of the order.   There is no provision for condoning the delay in filing the rectification application by the Authority.

Applicability of Advance Ruling

Section 103 (1) provides that the advance ruling pronounced by the Authority or the Appellate Authority under this Chapter shall be binding only on the applicant and the on the concerned officer or the jurisdictional officer in respect of the applicant.

Section 103 (1A) provides that the Advance Ruling pronounced by the National Appellate Authority under this Chapter shall be binding on the applicants and on the concerned officers and jurisdictional officers in respect of the applicants.

The advance ruling shall be binding unless the law, facts or circumstances supporting the original advance ruling have changed.

Advance Ruling to be void

Section 104 of the Act provides that where the Authority or the Appellate Authority or the National Appellate Authority finds that advance ruling pronounced by it has been obtained by the applicant or the appellant by fraud or suppression of material facts or misrepresentation of facts, it may, by order, declare such ruling to be void ab-initio and thereupon all the provisions of this Act or the rules made there under shall apply to the applicant or the appellant as if such advance ruling had never been made.

No order shall be passed unless an opportunity of being heard has been given to the applicant or the appellant.   A copy of this order shall be sent to the applicant, the concerned officer and the jurisdictional officer.

 Manual filing and processing

Rule 107A provides that notwithstanding anything contained in this Chapter, in respect of any process or procedure prescribed herein, any reference to electronic filing of an application, intimation, reply, declaration, statement or electronic issuance of a notice, order or certificate on the common portal shall, in respect of that process or procedure, include manual filing of the said application, intimation, reply, declaration, statement or issuance of the said notice, order or certificate in such Forms as appended to these rules.