To avoid disputes in the assessment of tax liability, a system of Advance Rulings was introduced in the GST regime. A Taxpayer, with the help of advance ruling, can prepare themselves ahead of time for their future GST liability payments. The Authority for Advance Ruling (AAR) is a legally established body that issues the advance ruling to an applicant. In this article, we shall discuss the following:
The Authority for Advance Ruling (Section 96 of the CGST ACT, 2017) pronounces advance rulings on the applications of non-resident/s in matters specified in Section 97(2) or 100(1) of the CGST Act, 2017. The ruling given by the AAR is binding on the applicant and the Government authorities. This way, it brings certitude in the determination of the tax liability. With the help of this arrangement, the applicant can avoid expensive and tedious litigations on any question of law that may arise in normal tax assessment proceedings. This concept emphasises on Foreign Direct Investment (FDI) as it provides greater certainty to foreign investors in respect of their indirect tax liabilities.
There are three Benches of the Authority- Principal Bench at Delhi, NCR Bench at Delhi, and the Mumbai Bench. The GST related applications are dealt only at the Principal Bench in Delhi.
The process for obtaining a ruling is quite inexpensive and straightforward. Refer here to know about the process in brief. Along with the application, INR 10,000 will have to be deposited through a Demand Draft. The process of obtaining a ruling is speedy as the AAR is legally required to pronounce the ruling within 90 days from the date of receipt of the application. Before pronouncing the ruling, an opportunity to be heard is provided to the applicant by the AAR.
The following classes of people are eligible to seek an advance ruling with the AAR:
- Person holding a valid Importer- Exporter code granted under Section 7 of the Foreign Trade Act, 1992.
- Person exporting any goods to India.
- Person with a justifiable cause to the satisfaction of the AAR.
- The AAR has the power to hear and decide on all applications and petitions.
- If any difficulty arises in giving a decision on the case, the AAR may either suo motu or on a petition made by the applicant or the Commissioner, within three months of observing such difficulty, remove such difficulty by passing an order as it considers appropriate for the case.
- Before the pronouncement of an advance ruling, the AAR has the power to reopen the hearing of the case if it believes that there is sufficient cause to reopen.
- If the AAR deems necessary, it may direct examination of records or reports, obtain reports after conducting any technical or market enquiry of any goods or services, call reports from experts and order such further investigation for an effective decision on the application.
- The AAR has all the powers of a civil court under the Code of Civil Procedure, 1908, regarding the following:
- Discovery and inspection,
- Requiring attendance of any person and examining such person on oath,
- Issuing commissions,
- Direct production of books of account and other records.
- The AAR also has the power to regulate their own procedure.
- An Advance ruling cannot be requested if:
- The matter is already pending in the applicant’s case before any other officer or court,
- The matter is already decided by the Appellate Tribunal or any court.
- The AAR may, either suo motu or on a petition made by the applicant or the Commissioner, require or permit the applicant or the Commissioner to
- Amend the records in case of any factual or material error, or
- Submit such additional facts along with supporting documents, as necessary, to facilitate in pronouncing the advance ruling.
- The applicant shall not be heard on any matter except the matter specified in the application. However, in exceptional cases, the AAR may permit an amendment to a question/matter.
- If the circumstances justify as per the AAR, the application may be continued by the executor, administrator, liquidator, or any other legal representative of the applicant.
- If it is brought to the notice of the AAR by the Commissioner or any other person that an advance ruling pronounced was obtained by fraud or misrepresentation of facts by the applicant, the following shall take place:
- The AAR shall examine the matter after the affidavit duly attested along with attested copies of supporting documents are submitted.
- A notice in writing shall be served to the applicant to explain as to why the ruling should not be declared void ab initio.
- A copy of the notice shall also be forwarded to the Commissioner, giving them a reasonable opportunity to be heard, before passing any order.
- The applicant may withdraw their application within thirty days from the date of such application with the permission of the AAR.
- If it is brought to the notice of the AAR by the Commissioner or any other person that an advance ruling pronounced was made under a mistake, the AAR may amend the ruling before it has been given effect to, after giving a reasonable opportunity to be heard to the applicant and the Commissioner.
What Is The Appellate Authority For Advance Ruling (AAAR)? When Can An Applicant Appeal To The AAAR?
The applicant or the concerned officer, aggrieved by any advance ruling pronounced by the AAR, may appeal to the Appellate Authority for Advance Ruling (Section 99 of the CGST Act, 2017). Few of its features are:
- This appeal shall be filed within thirty days from the day the ruling is communicated to the aggrieved party by the AAR.
- In case the AAAR has sufficient reasons to believe that the aggrieved party was prevented from presenting the appeal within the said period of thirty days, an additional period not exceeding thirty days may be provided to the said party.
- The AAAR, after giving reasonable opportunity to be heard to the aggrieved parties, will pass such order as it thinks fit to confirm or modify the ruling that has been appealed against for.
- The order shall be passed within ninety days from the date of filing of the appeal.
- In case there is any difference of opinion between the members of the AAAR, it shall be deemed that no advance ruling can be issued against the question under appeal.
- A signed and certified copy of the advance ruling shall be sent to the applicant, the concerned officer, the jurisdictional officer, and the AAR after the pronouncement of the ruling by the AAAR.