RECENT ADVANCE RULINGS IN GST (PART-8)

[Dr. Sanjiv Agarwal]

Advance rulings are important in any tax law as it provides a forum for clarification and possible interpretation of statutory provisions. Moreover, it conveys the legislative intention from the revenue’s view point. Provisions of advance ruling are contained in section 95 to 106 of CGST Act, 2017 and State / UT GST enactment. Rules 103 to 107 of also provide for forms, manner, certification etc.

The Authority for Advance Rulings (AAR) have been set up in all the states and we have now over 200 advance rulings on different issues already pronounced by various State Authorities. The appellate mechanism for filing appeals against AAR rulings is also in place and we have about twenty such appellate orders confirming or modifying the AAR orders. One major issue presently being faced is about multiple authorities (equal to number of States), each pronouncing a ruling of its own even if the matter is covered by some other State AAR’s rulings. There would be situations where we may have different rulings on same question(s) by different AARs. GST Council ought to decide on having a Centralized Authority as was there in erstwhile tax regime. The orders of Appellate Advance Ruling Authority have also started pouring in.

The summary of few more recent advance rulings pronounced by State Advance Ruling Authorities are discussed hereunder but these needs to be read in the background of the question involved:

Advance ruling on eligibility to seek advance ruling

Where the applicant had filed an application in Form GST ARA-01, dated 26.01.2018, for seeking advance ruling on 'clarification of rate of tax', for grain based Extra Neutral Alcohol (ENA) as they are engaged in manufacturing of grain based extra neutral alcohol. The question on which the advance ruling was sought on what tax rate applicable to grain based extra neutral alcohol and whether this comes under 18% or exempted or any other taxes category?

In the instant case, on verification of record submitted by jurisdictional authority, it was found that proceedings were initiated well before filing of application before AAR and applicant himself admitted that they had preferred writ petition before High Court on same issue which was pending for disposal. The AAR ruled that the application did not qualify pre-requisitions for admission as per section 98(2) of CGST Act, 2017.

[Crux Bio Tech India (P.) Ltd., In re. ((2018) 6 TMI 462 (AAR- Andhra Pradesh);]

Advance ruling on issue not within the scope of authority

Where the applicant was engaged in the manufacture of textile yarn and it approached AAR to specify the complete procedure for supplies by DTA to Advance Authorization Holder and specify the applicability of Foreign Trade Policy 2015 2020 mid-term review and specify procedure for procuring goods from DTA against Advance Authorization.

It was observed that the questions posed before the Authority in the instant case, did not classify under any of the categories (a) to (g) brought out under section 97(2). As regards first issue, needless to say that procedure laid down under Notification No. 48/2017-CT dated 18.10.2017 is loud and clear and has to be followed in letter and spirit. Further, the Authority felt that it is neither obliged nor mandated by the CGST Act, to clarify or specify any procedure brought into effect by a Notification. As per section 97(2) (b), ruling can be sought on 'Applicability of a notification under the provisions of this Act', but the applicant have not questioned applicability of a notification. On the contrary, the applicant admittedly agreed to the applicability of the notification. In the given circumstances, there was no reason to entertain issue posed in the instant Application.

The second issue was held to be beyond the ambit of section 97(2), as it related to applicability of Foreign Trade Policy 2015-2020 mid-term review and the related procedure. The applicant had sought a ruling for applicability of Foreign Trade Policy which was clearly beyond the ambit of Authority for Advance Ruling. Thus, the application was held to be not worthy of admission.

Thus, the application filed by the applicants, being beyond the scope of section 97(2), merit rejection at the stage of admission itself and was rejected.[Spentex Industries Ltd., In re, (2018) 8 TMI 285 (AAR- Madhya Pradesh); ].

Advance ruling on applicability of notifications and circulars not issued under CGST Act, 2017

Where the applicant had sought advance ruling on applicability of Notification dated 5.10.2017 issued by DIPP, Ministry of Commerce and Industry read with CBEC Circular No. 1060/9/2017-Cx. Dated 27th November 2017 in following situations:

• If the assessee takes over an eligible unit as a going concern under slump sale agreement and there is a change in the ownership of the unit which was availing the benefit of area based exemption Notification No. 50/2003-CE dated 10.6.2003, as amended', prior to 1.7.2017.
• If the said eligible unit availing of the exemption is physically shifted to a new location within the area specified in the said area based exemption notifications.
• If there is any addition or modification in the plant or machinery or on the production of new products after taking over an eligible unit during residual period of exemption.

AAR ruled that application seeking advance ruling on notifications and circulars not issued under CGST Act do not fall under section 97(2) (a to g) of CGST Act, 2017 and under purview of Authority of Advance Ruling constituted  under  the CGST/SGST Acts. [Kanj Products (P.) Ltd., In re, 2018 (6) TMI 429 - AUTHORITY FOR ADVANCE RULINGS, UTTARAKHAND ].

(Some more to follow …..)