Recently Higher Tax Officials and Corporates requested the government to clarify their doubts on GST without approaching the court directly. They demanded Government to start functioning of Advance Authority for Rulings (AAR) in order to simplify the certain tax issues regarding GST.
An advance ruling helps 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. Further, it helps in avoiding long drawn and expensive litigation at a later date.
What is an Advance Authority for Ruling?
The term “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 subsection (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.
AAR is to provide the facility of ascertaining the tax liability of nonresident, also to plan their tax affairs in advance and to avoid expensive litigation. The Authority for Advance Rulings consists of a Chairman, who is a retired Judge of the Supreme Court and two members of the rank of Additional Secretary to the Government of India, one each from the Indian Revenue Service and the Indian Legal Service.
Who can benefit advance ruling?
Any non-resident person whether individual, company, firm, association of persons or other body corporates can make an application for seeking an advance ruling in regard to his/its tax liability. Similarly, certain category on residents can also seek advance rulings.
What are the procedures for obtaining advance ruling?
The applicant desirous of obtaining advance ruling should make application to AAR in a prescribed form and manner. The format of the form and the detailed procedure for making application has been prescribed in the Advance Ruling Rules.
On 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 relevant records. The AAR may then examine the application along with the records and may also hear the applicant. Thereafter he will pass an order either admitting or rejecting the application.
Withdrawal of Application
The applicant may withdraw his application within 30 days from the date of filing the application, thereafter only with the leave of the Authority.
What are the matters concerned with advanced ruling?
(a) Classification of any goods or services or both
(b) Applicability of a notification issued under the provisions of CGST 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.
Benefits of advance ruling
- Helps the applicant in planning his income-tax affairs well in advance.
- Brings certainty in determining the tax liability.
- Helps avoiding long drawn and expensive litigation.
- It is inexpensive, expeditious and binding.
- Attract Foreign Direct Investment (FDI)
- Pronounce ruling expeditiously in a transparent and inexpensive manner
Here it gives us an opportunity for the taxpayer to approach AAR regarding the tax issues in GST. There are about 10 writ petitions were filed based on the challenging aspects of GST. Many corporates had dragged the Indian government and GST council to the high court after it was asked to meet their liable tax. Prominent companies, tax practitioners and multinational companies were moved to the court with a plan to demand the AAR to clarify the doubts on GST.
Some of the other writ petition filed, one among them was by Rajasthan consultants for improving on compliance requirements ,not charging interest, penalty, retrospective effect to late fee waivers, all these comes under GST framework.
The need for GST AAR was highly demanded from the earlier stage itself.so it would give more clarity on matters and save them from puzzle.