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Know all about Advance Ruling Provision under GST

What do you mean by Advance Ruling?

Advance Ruling is a mechanism where decisions are provided by the Authorities on certain specified issues or questions in advance, for cases where the questions raised are not pending or resolved in any court. GST law makes a comprehensive provision for advance rulings to ensure that disputes are minimal and litigation is reduced.

For instance, Mr A is a supplier of dairy products, breads, biscuits etc. He is unsure Whether UHT Sterilized Flavoured Milk is classifiable as per Notification No.1/2017-Central Tax (Rate) under:-

Tariff Heading 0402 which covers Milk and cream, concentrated or containing added sugar or other sweetening matter, including skimmed milk powder, milk food for babies –Taxable @ 9%
Tariff Heading 0404 which covers Whey, whether or not concentrated or containing added sugar or other sweetening matter; products consisting of natural milk constituents, whether or not containing added sugar or other sweetening matter, not elsewhere specified or included – Taxable @ 14%

Mr A can apply for advance ruling for getting clarity on the above question.

Which authorities can pass advance rulings under GST?

Authority for Advance Ruling (AAR) passes advance ruling orders pertaining to questions specified in Section 97(2) of the CGST Act, 2017
Any person aggrieved with the order of AAR can appeal to the Appellate Authority of Advance Rulings (AAAR)

What are the matters/questions specified in Section 97(2) of the CGST Act, 2017

Classification of any goods or services or both
Applicability of a notification issued under the provisions of CGST Act
Determination of time and value of supply of goods or services or both
Admissibility of input tax credit of tax paid or deemed to have been paid
Determination of the liability to pay tax on any goods or services or both
Whether applicant is required to be registered
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.

Can questions pertaining to Place of Supply be applied for advance ruling?

Both the AAR and AAAR are constituted under the respective State/Union Territory Act and not the Central Act.
Therefore, the ruling given by the AAR & AAAR will be applicable only within the jurisdiction of the concerned state or union territory.
It is for this reason that questions on determination of place of supply cannot be raised with the AAR or AAAR.

On whom will the Advance Ruling be binding?

An advance ruling shall be binding only on the applicant and on the concerned officer or the jurisdictional officer in respect of the applicant.
Advance ruling is not applicable to similarly placed other taxable persons in the State.
It is only limited to the person who has applied for an advance ruling.

Can an advance ruling be held as invalid?

An advance ruling shall be held as invalid if the AAR or AAAR finds that the advance ruling was obtained by the applicant by fraud or suppression of material facts or misrepresentation of facts.
In such a situation, all the provisions of the CGST/SGST Act shall apply to the applicant as if such advance ruling had never been made.
An order declaring advance ruling to be void can be passed only after hearing the applicant.

When can an application of advance ruling be rejected?

Application for advance ruling will not be admitted in cases where the question raised in the application is already pending or decided in any proceedings in the case of an applicant under any of the provisions of this Act.

Procedure for obtaining Advance Ruling

The applicant desirous of obtaining advance ruling should make application to AAR in a prescribed form and manner according to the format and procedure prescribed in the Advance Ruling Rules

Upon 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 will 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 after providing opportunity of being heard.
1. If the application is rejected, it should be by way of a speaking order giving the reasons for rejection.
2. If the application is admitted, the AAR shall pronounce its ruling within 90 days of receipt of application.

What measures are available if one is aggrieved by the order of the AAR?

If the applicant or the jurisdictional officer of CGST/SGST is aggrieved with the finding of the AAR, he may file an appeal with AAAR.

Is there any time limit for appeal to AAAR?

Appeal to the AAAR must be filed within 30 days from the receipt of the advance ruling.
The appeal has to be in prescribed format as prescribed in the Advance Ruling Rules.

Within how many days an order by AAAR is passed?

The AAAR must pass an order after hearing the parties to the appeal within a period of 90 days of the filing of an appeal.

Can advance ruling orders be rectified?

AAR and AAAR has the power to amend their orders to rectify any mistake apparent from the record
Such rectification is to be done within 6 months from the date of the order.
Such mistake may be noticed by the authority on its own accord or may be brought to its notice by the applicant or the prescribed or the jurisdictional CGST/SGST officer.
If a rectification has the effect of enhancing the tax liability or reducing the quantum of input tax credit, the applicant must be heard before the order is passed.

Powers and procedure of AAR and AAAR

1.Both the AAR and AAAR are vested with the powers of a civil court under Code of Civil Procedure, 1908, pertaining to

i. discovery and inspection

ii. enforcing the attendance of a person and examining him on oath

iii. compelling production of books of account and other records

2. Both the authorities are deemed to be a civil court for the purposes of section 195 of the Code of Criminal Procedure, 1973.

3. The AAR and AAAR also have the power to regulate their own procedure.

An advance ruling helps the applicant in planning his activities which are liable for payment of GST, well in advance and also brings certainty in determining the tax liability.

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