ROLE OF AUTHORITY OF ADVANCE RULING UNDER GST

[Yogesh Narang]

In the present article, we will discuss detail description and purpose of Authority of Advance Ruling (AAR) established under GST.  I will try to cover or describe all the need and purposes of AAR under GST.

INTRODUCTION:

“Advance ruling” means a decision provided by the Authority or the Appellate Authority to an applicant on matters or on questions specified in sub-section (2) of section 97 or sub-section (1) of section 100 of the CGST Act, 2017, in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant. An authority of advance ruling is established to help the applicant in planning his activities which are liable for payment of GST, well in advance. It also brings certainty in determining the tax liability, as the ruling given by the “Authority for Advance Ruling” is binding on the applicant as well as Government authorities. The advance ruling given by the Authority can be appealed before an Appellate authority for Advance Ruling (AAAR).  

NEED OF ADVANCE RULING:

1. That it helps in avoiding expensive litigation at a later date.
2. That an advance ruling is inexpensive.
3. That the procedure of seeking advance ruling is simple and expeditious.
4. That it provides certainty and transparency to a taxpayer with respect to an issue which may potentially cause a dispute with the tax administration.
5. That it helps in reduce litigation which may occur or arise in future.
6. That GST law prescribed time line for passing an order by AAR.

NOTIFICATIONS ISSUED UNDER GST LAW:

Notification No. 55/2017-Central Tax, dated 15.11.2017

Circular no. 25/25/2017-GST dated 21.12.2017

MATTERS/QUESTIONS SPECIFIED IN SECTION 97(2) OF THE CGST ACT, 2017:

As we discuss above that AAR established to deals with the matter or questions as specified in section 97(2) and section 100(1) of CGST Act, 2017 which are prescribed as follows:

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

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

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

(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 or both;

(f) whether applicant is required to be registered;

(g) 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.   

 Section 100(1) of the CGST Act states that 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.

Further, it is clear that section 100(1) deals with appeal filed before the Appellate Authority of Advance Ruling and order passed by such AAAR is also termed as Advance Ruling under GST Law.

PROCEDURE FOR SEEKING ADVANCE RULING:

1. Section 97(1) of CGST Act, 2017 deals with the procedure for obtaining and seeking advance ruling under GST, which is as under:

97. (1) An applicant desirous of obtaining an advance ruling under this Chapter may make an application in such form and manner and accompanied by such fee as may be prescribed, stating the question on which the advance ruling is sought.

Therefore an applicant who is seeking advance ruling may filed an application before the AAR on the questions as specified in section 97(2) which have already mentioned above.

2. That format of the form and the detailed procedure for making application have been prescribed in the Advance Ruling Rules.

Rule 104 of CGST Rules,2017 deals with appeal before AAR which states that:

1. The application for advance ruling shall be filed u/s 97(1) of the CGST Act, 2017.
2. It shall be filed at common portal of GST by filing FORM GST ARA-01.
3. That the FORM GST ARA-01 shall be accompanied with a fee of ₹ 5,000/- (Five thousand only)

3. That upon receipt of an application, the AAR shall send a copy of application to the officer in whose jurisdiction the applicant falls and call for all the relevant records.
4. That before giving the ruling, AAR must hear the applicant or his authorised representative as well as the jurisdictional officers of CGST/SGST.
5. That if there is a 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.
6. That 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.

ADMISSION AND REJECTION OF APPLICATION OF ADVANCE RULING:

1. That the AAR examines the application filed before it along with the records and may also hear the applicant and it will pass an order either admitting or rejecting the application.
2. That application for advance ruling shall not be admitted in cases 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.
3. That the questions on determination of place of supply cannot be raised with the AAR or AAAR.
4. That if the application is rejected, it should be by way of a speaking order giving the reasons for rejection.
5. That if the application is admitted, the AAR shall pronounce its ruling within ninety days of receipt of application.

APPEALS AGAINST ORDER OF AAR:

1. Rule 106 of CGST Rules,2017 deals with appeal before AAAR which states as follows:

1. That an applicant or prescribed or jurisdiction officer of CGST/SGST/UTGST, aggrieved by the order passed u/s 98(6) of CGST Act, 2017 by AAR, may file appeal before AAAR.
2. That the applicant shall file appeal at common portal of GST by filing FORM GST ARA-02.
3. That the FORM GST ARA-02 shall be accompanied with a fee of ₹ 10,000/- (Ten thousand only)
4. That the concerned officer or the jurisdictional officer referred to in section 100 shall file appeal on the common portal in FORM GST ARA-03 and no fee shall be payable by the said officer for filing the appeal.

2. That if the applicant is aggrieved with the finding of the AAR, he can file an appeal with AAAR.
3. That if the prescribed or jurisdictional officer of CGST/SGST does not agree with the finding of AAR, he can also file an appeal with AAAR. (Prescribed officer of CGST/SGST means an officer who has been designated by the CGST/SGST administration in regard to an application for advance ruling.)
4. That appeal must be filed within thirty days from the receipt of the advance ruling.
5. That the appeal has to be in prescribed form and has to be verified in the manner as prescribed in Rule 106 of CGST Rules, 2017.
6. That 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.
7. That 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.

MANUAL FILING OF APPLICATION BEFORE AAR AND APPEAL BEFORE AAAR:

That law prescribed the manner of filing application before AAR and appeal against the order of AAR before AAAR electronically at common portal of GST but due to inability of FORMS at common portal a new rule was inserted in CGST Rules, 2017 through Notification No. 55/2017-Central Tax, dated 15.11.2017 and further Circular no. 25/25/2017-GST dated 21.12.2017 prescribing the detailed procedure for manual filing of applications for Advance Ruling and appeals before Appellate Authority for Advance Ruling has been issued.

[107A. Manual filing and processing. – 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.] 

TO WHOM THE ADVANCE RULING IS APPLICABLE:

An advance ruling pronounced by AAR or AAAR shall be binding only on the applicant who has sought the advance ruling and on the concerned officer or the jurisdictional officer in respect of the applicant. This clearly means that an advance ruling is not applicable to any other taxable persons in the same territory or State. It is only limited to the person who has applied for an advance ruling.

RECTIFICATION OF MISTAKES:

1. That law gives power to AAR and AAAR to amend their order to rectify any mistake apparent from the record.
2. That the AAR and AAAR can rectify its mistake within a period of six months from the date of the order.
3. That the said mistake may be noticed by the authority on its own accord or may be brought to its notice by the applicant or the prescribed or the jurisdictional CGST/SGST officer.
4. That if a rectification has the effect of enhancing the tax liability or reducing the input tax credit, the applicant must be heard before the order is passed.

POWERS AND PROCEDURE OF AAR AND AAAR:

1. That both the AAR and AAAR are vested with the powers of a civil court under Code of Civil Procedure, 1908, for discovery and inspection, enforcing the attendance of a person and examining him on oath, and compelling production of books of account and other records.
2. That both the authorities are deemed to be a civil court for the purposes of section 195 of the Code of Criminal Procedure, 1973.
3. That any proceeding before the authority shall be deemed to be judicial proceeding under section 193 and 228 and for the purpose of section 196, of the Indian Penal Code, 1860.
4. That the AAR and AAAR also have the power to regulate their own procedure.