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