Under the GST Act, taxpayers have been provided with a mechanism to get clarification or answers to the questions related to any specified matter or any matter related to the supply of goods and services.
To get the clarification, a taxpayer can approach a body called AAR or Authority for Advance Ruling which then gives a decision in the form of Advance Ruling over the matter. If there are matters over which the AAR cannot issue an Advance Ruling then the applicant or any other concerned party like a jurisdictional officer, concerned officer, any interested person can approach AAAR or Appellate Authority for Advance Ruling.
To understand the processes related to Advance Ruling, you first need to understand what Advance Ruling is.
Advance ruling is an interpretation of tax laws by tax authorities, given to taxpayers who are confused about various tax laws.
The rules and procedures related to Advance Ruling are covered by section 95 to section 106 of the Chapter XVII of the CGST Act. If a taxpayer or any concerned party has a question on the supply of goods and services or any specified matter, he can approach AAR or AAAR, which then gives a decision to resolve the query. Advance Ruling applies not only to the supplies which are being undertaken but also on supplies which are proposed to be undertaken.
In matters related to Advance Ruling, an application is a document which seeks an advance ruling by specifying the question in the correct manner on which advance ruling is sought. An applicant is someone who seeks an advance ruling. He is a person who is either registered or intends to register under the CGST Act. He can also be someone who anticipates his liability to be registered under the Act.
Here there is one confusion. If we read section 97(1), it suggests that only one query can be raised per application. However, the examination of the application form GST ARA-01 indicates that multiple queries can be raised per application.
The constitution of AAR and AAAR is governed by the provisions of the SGST Act or the UTGST Act. They have the authority to give an advance ruling in respect to the state in which they are created. Let’s understand this with the help of an example.
Example: An AAR or AAAR in the state of Uttar Pradesh will be called as UPAAR or Uttar Pradesh Authority for Advance Ruling, and it will have the authority to give an advance ruling in the state of Uttar Pradesh.
Here are the objectives to set up the Advance Ruling mechanism by the tax payer.
A tax payer can ask for clarification about advance ruling under GST in the below mentioned situations. The questions for which an applicant may seek advance ruling are listed below:
One can seek advance ruling only for queries which fall in the above-mentioned categories. For any other query, one cannot seek advance ruling.
Here are some categories of queries for which advance ruling can’t be sought:
This is how the application is processed by the AAR:
AAR itself and other aggrieved parties are allowed to appeal to a higher authority, i.e. AAAR:
For example, where the advance ruling has been pronounced on 10 November 2017 and the applicant and the concerned officer receive the same on 12 November 2017 but the jurisdictional officer receives it on 15 November 2017, the date of reckoning for time limit to prefer an appeal before the AAAR is 15 November 2017 despite the applicant having received it on 12 November 2017. Nonetheless, the AAAR is empowered to condone the delay if sufficient cause for the same is demonstrated.
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.
Whereas a difference of opinion amidst the members of the AAR would lead to that issue being referred before the AAAR, in circumstances where the members of the AAAR differ on any point before it in appeal or reference, it shall be deemed that no advance ruling can be issued in respect of the query posed in the appeal or reference. Thus, the above provision spells a veritable dead-end for proactive taxpayers who seek to have their stance abundantly clarified to avoid any prosecution.
Hitherto, an advance ruling would cement the position of law in respect of the issue over which clarity has been sought. The CGST Act makes a marked departure from this position by stating that the advance ruling would be binding only on the applicant, the concerned officer and the jurisdictional officer.
Consider, for example, Company A requires clarification on the classification of its product ‘Choco-fills’. Company B had already raised the same question in respect of its product ‘Choco-Fillz’ before the DAAR and an advance ruling was obtained by Company B that the choco-fillz are biscuits. Since the advance ruling obtained by Company B is binding only on it and the concerned officer and jurisdictional officer in that case, there is no clarity on whether Company A may directly follow the advance ruling obtained by Company B or whether the matter should be pursued afresh. Thus, where the Choco-fillz may be ruled as a biscuit for Company B, the same Choco-fills sold by Company A may be held as chocolate wafers because of this seemingly small but significant deviation. This deviation espouses more chaos than compliance, and would lead to mounting applications and litigation.
Can the AAR bar an applicant from seeking an advance ruling because the issue is pending adjudication in any application filed by an unknown party before it, or does the provision only seek to restrict applications where the law has already been declared?
No, the AAR cannot bar a person from seeking advice. On perusal of the application format in FORM GST ARA-01, it becomes clear that the restriction on the AAR is limited to admitting an application where the question raised has been adjudicated, or is pending adjudication in the applicant’s case.
As per circular dated 25/25/2017, Application for Advance ruling can be filed manually.