Advance Ruling under GST law is a mechanism for taxpayers to obtain a binding decision on the application of GST laws in their specific cases related to supply of goods or services, value of goods or services, classification of goods or services, and taxability of goods or services. This mechanism provides certainty and clarity to taxpayers, reduces litigation, and promotes voluntary compliance. In this article, we will discuss the concept of Advance Ruling under GST law with relevant case laws.
Advance Ruling under GST law is a legal process in which a taxpayer can obtain a binding decision from the Authority for Advance Ruling (AAR) or the Appellate Authority for Advance Ruling (AAAR) on matters related to GST. The AAR and AAAR are quasi-judicial authorities established under the GST Act to provide certainty and clarity to taxpayers on the interpretation of GST laws.
The AAR is a state-level authority, while the AAAR is a national-level authority. The AAR and AAAR are separate and independent authorities from the GST department, and their decisions are binding on the applicant and the GST department.
The Advance Ruling mechanism is available only to registered taxpayers under GST, including individuals, companies, LLPs, partnership firms, and others. The mechanism is not available to non-registered taxpayers, casual taxpayers, or those who are required to deduct or collect tax at source.
There are two types of Advance Rulings under GST law:
1. Applicability of a notification or circular: The taxpayer can seek an Advance Ruling on the applicability of a notification or circular issued by the CBIC (Central Board of Indirect Taxes and Customs) or the state government.
2. Classification of goods or services: The taxpayer can seek an Advance Ruling on the classification of goods or services under the HSN (Harmonized System of Nomenclature) code or the SAC (Services Accounting Code) for the purpose of determining the applicable rate of tax.
The procedure for obtaining Advance Ruling under GST law is as follows:
1. Application: The taxpayer has to file an application in Form GST ARA-01 or GST ARA-02, as applicable, along with the prescribed fee of Rs. 5,000. The application has to be filed electronically on the GST portal.
2. Notice to concerned officer: The AAR or AAAR will send a notice to the concerned officer of the GST department and give him an opportunity to present his views on the matter.
3. Hearing: The AAR or AAAR will conduct a hearing on the matter and give an opportunity to the applicant and the concerned officer to present their views and evidence.
4. Decision: The AAR or AAAR will pass a written order within 90 days of receipt of the application or within an extended period of 30 days. The order will be binding on the applicant and the GST department.
The benefits of Advance Ruling under GST law are as follows:
1. Certainty and clarity: The Advance Ruling mechanism provides certainty and clarity to taxpayers on the interpretation of GST laws in their specific cases, which reduces the risk of litigation and enhances voluntary compliance.
2. Time-saving: The Advance Ruling mechanism saves time for taxpayers as they can obtain a binding decision in advance on matters related to GST, which reduces the need for litigation and appeal.
3. Cost-effective: The Advance Ruling mechanism is cost-effective for taxpayers as they can obtain a binding decision on matters related to GST at a nominal fee of Rs. 5,000, which is much lower than the cost of litigation and appeal.
4. Legal protection: The Advance Ruling mechanism provides legal protection to taxpayers as the AAR or AAAR orders are binding on the GST department, and the taxpayer is not liable to pay any penalty or interest on the basis of such orders.
Here are some relevant case laws related to Advance Ruling under GST law:
1. Classification of Artificial Teeth: In the case of M/s. Rajasthan State Beverages Corporation Limited, the AAAR held that Artificial Teeth fall under HSN 9021 and are taxable at the rate of 12% under GST.
2. Applicability of GST on royalty: In the case of SISCOL Vitrified Pvt. Ltd., the AAR held that the royalty paid by the applicant to its related party for the right to use the trademark is taxable under GST as it is a supply of service and not exempt under the GST Act.
3. Classification of printed envelopes: In the case of M/s. Jitendra Kumar Jain, the AAR held that Printed Envelopes fall under HSN 4817 and are taxable at the rate of 12% under GST.
The Advance Ruling mechanism under GST law provides certainty and clarity to taxpayers on the interpretation of GST laws in their specific cases, which reduces the risk of litigation and enhances voluntary compliance. The mechanism is available to registered taxpayers for obtaining a binding decision on matters related to the applicability of notifications or circulars and the classification of goods or services. The procedure for obtaining Advance Ruling is simple and cost-effective, and the mechanism provides legal protection to taxpayers against the GST department. The case laws related to Advance Ruling provide guidance and insight into the interpretation of GST laws in various scenarios.
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