What is advance ruling?
Any advance tax ruling is a written interpretation of tax laws. It is issued by tax authorities to corporations and individuals who request for clarification of certain tax matters. An advance ruling is often requested when the taxpayer is confused and uncertain about certain provisions. Advance tax ruling is applied for, before starting the proposed activity.
For example, under income tax, advance ruling is available in international taxation. This is to help non-residents ascertain the income-tax liability, plan their income-tax in advance and avoid long drawn and costly legal disputes.
As per GST, the advance ruling is a written decision given by the tax authorities to an applicant on questions relating to the supply of goods/services.
Why is advance ruling under GST necessary?
The objective of any advance ruling, including under GST is to-
- Provide certainty for tax liability in advance in relation to a future activity to be undertaken by the applicant
- Attract Foreign Direct Investment (FDI) – By clarifying taxation and showing a clear picture of the future tax liability of the FDI. The clarity and clean taxation will attract non-residents who do not want to get involved in messy tax disputes.
- Reduce litigation and costly legal disputes
- Give decisions in a timely, transparent and inexpensive manner
When can one request for GST Advance Ruling?
Any taxpayer can request for advance ruling when he is uncertain of the provisions. Advance tax ruling is applicable on –
(a) Classification of any goods and/or services under the Act
(b) Applicability of a notification which affects the rate of tax
(c) Determination of time and value of supply of goods/services
(d) Whether input tax credit paid (or deemed to be paid) will be allowed
(e) Determination of the liability to pay tax on any goods/services
(f) Whether the applicant has to be registered under GST
(g) Whether any particular thing done by the applicant regarding goods/services will result in a supply.
Procedure on receipt of application
On receipt of an application, a copy will be forwarded to the prescribed officer and he will furnish the necessary relevant records.
Process of Advance Ruling under GST
An advance ruling is first sent to Authority for Advance Ruling (Authority). Any person unhappy with the advance ruling can appeal to the Appellate Authority for Advance Ruling (Appellate Authority).
Application for Advance ruling has to be made in FORM GST ARA-01 along with Rs. 5,000.
Decision of the Authority
The Authority can by order, either admit or reject the application.
Will all applications be allowed?
The Authority will NOT admit the application when-
(b) The same matter has already been decided in an earlier case for the applicant
(c) The same matter is already pending in any proceedings for the applicant
Basically, Advance Ruling will not be possible in any pending case or any decision already given.
Applications will be rejected only after giving an opportunity of being heard. Reasons for rejection shall be given in writing.
When will the authority give their decision?
Advance ruling decision will be given within 90 days from application.
If the members of the Authority differ in opinion on any point, they will refer the point to the Appellate Authority.
Advance Ruling will have prospective effect only.
On whom will the advance ruling apply?
The advance ruling will be binding only –
(a) On the applicant
(b) On the jurisdictional tax authorities in respect of the applicant.
If the law, facts of the original advance ruling change then the advance ruling will not apply.
Appeal to the Appellate Authority
If the applicant aggrieved by the advance ruling he can appeal to the Appellate Authority.