An advance ruling helps the applicant in planning his activities which are liable for payment of GST, well in advance. It also brings certainty in determining the tax liability, as the ruling given by the Authority for Advance Ruling is binding on the applicant as well as Government authorities. Further, it helps in avoiding long drawn and expensive litigation at a later date. Seeking an advance ruling is inexpensive and the procedure is simple and expeditious. It thus provides certainty and transparency to a taxpayer with respect to an issue which may potentially cause a dispute with the tax administration. A legally constituted body called Authority for Advance Ruling (AAR) can give a binding ruling to an applicant who is a registered taxable person or is liable to be registered. The advance ruling given by the Authority can be appealed before an Appellate authority for Advance Ruling (AAAR). There are time lines prescribed for passing an order by AAR and by AAAR. The definition of Advance ruling given under the Act is a broad one and an improvement over the existing systems of advance rulings under Customs and Central Excise Laws.
Procedure on receipt of application
On receipt of an application, a copy will be forwarded to the prescribed officer and he will furnish the necessary relevant records.
Process of Advance Ruling under GST
An advance ruling is first sent to Authority for Advance Ruling (Authority).
Any person unhappy with the advance ruling can appeal to the Appellate Authority for Advance Ruling (Appellate Authority).
Why Is Advance Ruling Under GST Necessary?
1) Provide certainty for tax liability in advance in relation to a future activity to be undertaken by the applicant
2) Attract Foreign Direct Investment (FDI) - By clarifying taxation and showing a clear picture of the future tax liability of the FDI. The clarity and clean taxation will attract non-residents who do not want to get involved in messy tax disputes.
3) Reduce litigation and costly legal disputes
4) Give decisions in a timely, transparent and inexpensive manner
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