Under GST, taxpayers can seek an Advance Ruling from the Authority for Advance Ruling (AAR) on various matters related to the supply of goods or services or both being undertaken or proposed to be undertaken by the taxpayer. It is issued by tax authorities to corporations and individuals who request clarification of certain tax matters. Generally, Advance rulings can be given only for a proposed transaction. Due to some changes in the existing system advance ruling under GST can be obtained for a proposed transaction as well as a transaction already undertaken by the appellant. In case a taxpayer is not satisfied with the ruling of AAR, he can file an appeal before the Appellate Authority for Advance Ruling (AAAR). In this blog, we will discuss the process of appeal to the AAAR for Advance Ruling under GST.
Matters/questions on which Advance ruling can be sought
- Classification of any goods and services or both under the act.
- Determination of time, value, and supply of goods and services.
- Applicability of a notification that affects the tax rate.
- Whether input tax credit of tax paid or deemed to be paid.
- Whether the applicant is required to be registered.
- Determination of the liability to pay tax on any goods or services or both.
- Whether any particular transaction is a supply of goods or services or both.
Process of Advance Ruling under GST:
The process of appeal to the Appellate Authority for Advance Ruling under GST can be broken down into the following steps:
Step 1: Application to the Authority for Advance Ruling (AAR)
A taxpayer can apply for an Advance Ruling in Form GST ARA-01 to the AAR. The AAR will examine the application and issue a ruling in Form GST ARA-03. The ruling will be binding on the taxpayer who sought it, and on the tax authorities in respect of the transaction or activity in question.
Step 2: Filing an appeal to the Appellate Authority for Advance Ruling (AAAR)
If a taxpayer is not satisfied with the ruling of AAR, he can file an appeal to the AAAR in Form GST ARA-02 . The appeal must be filed within 30 days from the date of receipt of the ruling. The appeal fee for filing an appeal to the AAAR is Rs. 10,000.
Step 3: Hearing and decision by the Appellate Authority for Advance Ruling
The AAAR will examine the appeal and pass an order in Form GST ARA-04. The order passed by the AAAR will be binding on the taxpayer, the tax authorities, and the AAR in respect of the transaction or activity in question. The AAAR can confirm, modify, or annul the ruling of AAR. If the AAAR modifies or annuls the ruling of AAR, it will issue a fresh ruling in Form GST ARA-05.
Step 4: Rectification of Advance Ruling
AAR or AAAR can rectify its order to correct any mistake apparent from the record within a period of six months from the date of the order. The rectification order will be passed in Form GST ARA-06. If the rectification results in the enhancement of tax liability or reduction in input tax credit, the taxpayer will be given an opportunity of being heard.
Decision of the Appellate Authority
Once an appeal is filed with the AAAR, it shall provide an opportunity of being heard to the appellant as well as to the concerned officer or authority who passed the ruling. After examining all the facts and submissions made before it, the AAAR shall pass an order either upholding or modifying the ruling appealed against. The AAAR can modify the ruling based on the facts and circumstances of the case. If the members of the AAAR differ in opinion on any point, then the AAAR cannot issue an advance ruling.
The AAAR shall issue its decision within 90 days from the date of the application. A copy of the advance ruling signed by the Members will be sent to the applicant, the prescribed or the jurisdictional CGST / SGST officer, and to the Authority. The order passed by the AAAR shall be binding on the applicant as well as the concerned officer or authority. It is important to note that the decision of the AAAR can be challenged before the High Court or the Supreme Court on questions of law arising from such a decision. However, the challenge can only be made if the amount involved in such an appeal is more than Rs. 50 lakhs.
Rectification of Advance Ruling:
An application for rectification of an advance ruling can be made by the applicant or the concerned officer or authority within a period of six months from the date of the advance ruling. Such an application can be made in case of any mistake apparent on the face of record. The AAR or AAAR, as the case may be, may amend or modify the advance ruling after giving an opportunity of being heard to the applicant and the concerned officer or authority. The rectification of advance ruling shall be binding on the applicant as well as the concerned officer or authority.
Powers of the Authority and Appellate Authority
The Authority for Advance Ruling and Appellate Authority for Advance Ruling have wide-ranging powers under the GST law. Some of the key powers of the AAR and AAAR are as follows:
- To determine the liability to pay tax on any transaction or activity
- To determine the applicability of a notification issued under the GST law
- To determine the admissibility of input tax credit under the GST law
- To determine the classification of any goods or services under the GST law
- To determine the place of supply of goods or services under the GST law
- To determine the time of supply of goods or services under the GST law
- To determine the value of goods or services under the GST law
In addition to the above powers, the AAR and AAAR can also examine any other question of law or fact arising from the transaction or activity in question. The AAR and AAAR have the power to summon witnesses, require the production of documents, and take evidence on oath.
The Advance Ruling mechanism is an important tool for taxpayers under the GST regime to obtain clarity and certainty on the application of GST laws. The process of appeal to the Appellate Authority for Advance Ruling provides an additional layer of recourse for taxpayers who are not satisfied with the ruling of the AAR.
It is important for taxpayers to understand the process of Advance Ruling and the powers of the Authority and the Appellate Authority to make informed decisions and avoid disputes with the tax authorities. Staying updated with the latest changes in the GST law is essential to ensure compliance and avoid any adverse consequences.
Overall, the Advance Ruling mechanism under GST promotes a transparent and efficient tax system, providing certainty and clarity to taxpayers on the tax treatment of a particular transaction. It is an important provision that helps taxpayers to avoid disputes and plan their transactions better.
Need help in being prepared for GST audits and litigations? IRIS GST can help!
IRIS LMS – Litigation Management Solution helps users keep track of due dates, manage notices and cases, and store documents and precedences along with their legal positions at one location digitally. The solution is designed to assist you in facing GST audits efficiently and managing GST litigations effectively.
We highly recommend you schedule a free demo of IRIS LMS to understand what it can do for you. Click the link below!
IRIS is a listed reg-tech solution provider and an authorized GSP for the past 5 years. IRIS GST has helped businesses like L&T, Bajaj, Thermax and Forbes meet their GST compliance efficiently and effectively with no missed due dates and 100 % ITC claim.
Please feel free to revert with any queries regarding GST litigation and departmental audits. Our team of experts can certainly take on your specific questions, if any and look at resolving the issues efficiently. Email: firstname.lastname@example.org.