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Understanding Advance Ruling in GST

The Ministry of Finance has introduced Advance Ruling Under Gst to be highly taxpayer-friendly. Advance ruling in GST assists taxpayers in planning their GST liability beforehand. It is binding on both the taxpayer and the Government, allowing taxpayers to avoid costly litigation. Notably, unlike the advance ruling under service tax, GST advance ruling can be obtained for both proposed and already undertaken transactions. To manage all aspects of Advance Ruling Under Gst, the Authority for Advance Ruling (AAR) has been established, offering binding rulings to registered or liable-to-be-registered applicants. The advance ruling provisions in GST can help clarify:

  • The classification of goods or services or both.
  • The applicability of notifications issued under the GST Act.
  • Determination of the time and value of goods or services.
  • Input tax credit admissibility of tax paid or deemed to be paid.
  • Determination of the liability to tax on goods or services or both.
  • GST registration requirement of an applicant.
  • Whether an action by the applicant results in the supply of goods or services or both.
  • Other matters pertaining to the GST Act and Rules.

Procedure for Making an Advance Ruling Application

Applicants seeking an advance ruling must submit an application in Form GST ARA-1 with the relevant question and a fee of Rs.5000. Upon receiving the application, the Authority for Advance Ruling sends it to the concerned officer for necessary records. The authority reviews the application alongside the documents from both the taxpayer and officer. An order admitting or rejecting the application is then passed. In case of rejection, applicants are given an opportunity to explain, and reasons for rejection are provided. If the application is part of ongoing proceedings under the GST Act, it may be rejected. Accepted applications are to be resolved within 90 days, including hearings for applicants and jurisdictional GST officers. If there is a disagreement between two AAR members, the matter is referred to the Appellate Authority for Advance Ruling. Further discrepancies go unresolved, deeming no ruling can be made.

Applicability of Advance Ruling

The advance ruling issued will be binding on:

  • The applicant.
  • The applicant's concerned officer or jurisdictional officer.

Note: Should fraud or misrepresentation of facts be discovered, authorities may declare the ruling void ab initio under section 104. For further details, consider the e-Advance Rulings Amendment Scheme 2023.

Rectification of Mistakes

Authorities may amend an advance ruling within 6 months from the order date to rectify any errors. Corrections may be instigated by the Authority or by notice from relevant officers or the applicant. If rectification increases tax liability or decreases input tax credit, the applicant should be given a hearing opportunity. More information can be found under the advance ruling procedures for registered taxpayers and the procedures for unregistered dealers.

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