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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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Frequently asked questions

Common questions about Advance Ruling Under GST Act.

What is an advance ruling in GST?
An advance ruling in GST is a binding ruling provided by the Authority for Advance Ruling (AAR) to an applicant regarding various aspects of GST compliance. It helps taxpayers plan for their GST liability in advance and avoid costly litigations.
Who can apply for an advance ruling under GST?
A registered taxable person or someone liable to be registered under GST can apply for an advance ruling from the Authority for Advance Ruling (AAR).
What matters can be clarified through an advance ruling in GST?
An advance ruling can be sought on matters related to classification of goods or services, applicability of notifications, determination of time and value of supply, admissibility of input tax credit, determination of tax liability, registration requirements, and whether a particular activity amounts to supply of goods or services.
How can an applicant seek an advance ruling under GST?
An applicant can apply for an advance ruling by filing Form GST ARA-1 along with the question and a fee of Rs. 5,000 with the Authority for Advance Ruling (AAR).
How long does it take to obtain an advance ruling under GST?
If the application for an advance ruling is accepted, the Authority for Advance Ruling must pass an order within 90 days of receiving the application.
Is an advance ruling binding on the applicant and the government?
Yes, an advance ruling pronounced by the Authority for Advance Ruling is binding on both the applicant and the concerned jurisdictional GST officers.
Can an advance ruling be rectified if there is a mistake?
Yes, the Authority for Advance Ruling can rectify any mistake or error in the advance ruling within 6 months from the date of the order, either on its own or upon being brought to its notice by the applicant or the jurisdictional officer.
What happens if there is a difference of opinion within the Authority for Advance Ruling?
If there is a difference of opinion between the members of the Authority for Advance Ruling, the matter is referred to the Appellate Authority for Advance Ruling. If the Appellate Authority also cannot reach a decision, it is deemed that no advance ruling can be given on the question raised.
Can an advance ruling be obtained on a proposed transaction?
Yes, one of the major advantages of an advance ruling under GST is that it can be obtained on a proposed transaction as well as a transaction already undertaken by the applicant.
What happens if an advance ruling is obtained by fraud or misrepresentation of facts?
If the authorities find that the applicant has obtained the advance ruling by fraud or misrepresentation of facts, they can declare such an advance ruling to be void ab initio (invalid from the beginning) by passing an order under section 104 of the GST Act.