Because the GST provisions are new, they require a lot of clarification from businesses, which is why an advance ruling is required.
What Is the Advance Ruling?
Any advance tax ruling is a written interpretation of tax laws. Tax authorities issue it to corporations and individuals who request for clarification of certain tax matters. An advance ruling is often requested when the taxpayer is confused and uncertain about certain provisions. Advance tax ruling is applied for: before starting the proposed activity.
An advance ruling is usable in international taxation, for example, under income tax. This is to assist non-residents in determining their income tax liability, planning their income tax ahead of time, and avoiding protracted and costly legal battles. An advance ruling is a written decision issued by the tax authorities to an applicant on questions concerning the supply of goods or services under the GST.
Why is advance ruling under GST necessary?
The goal of any advance ruling, including in the case of GST, is to:
- Provide certainty about tax liability in advance of time for a future activity that the applicant will engage in.
- Obtain FDI (Foreign Direct Investment) – By making taxation more transparent and providing a clear picture of FDI’s future tax liability.
- Non-residents who do not want to get entangled in messy tax disputes will be attracted by the clarity and simplicity of the tax system.
- Reduce the amount of time spent in court and the amount of money spent on legal fees.
- Decisions should be made in a timely, transparent, and cost-effective manner.
When can one request for GST advance ruling?
When a taxpayer is unsure of the provisions, he can request an advance ruling. The advance tax ruling is valid for
- Under the Act, any goods and services must be classified
- Applicability of a notification that has an impact on the tax rate
- Determination of delivery time and value of goods/services
- Whether or not an input tax credit has been paid or is deemed to have been paid
- Determination of the tax liability for any goods or services
- Is the applicant required to be GST registered?
- Whether an applicant’s actions in relation to goods or services will result in a supply.
Procedure on receipt of application
- When an application is received, a copy is forwarded to the prescribed officer, who will provide the necessary relevant records.
Process of Advance Ruling under GST
The Authority for Advance Ruling receives an advance ruling first authority. Anyone who is dissatisfied with the advance ruling may file a complaint with the Appellate Authority for Advance Ruling (Appellate Authority).
A request for an advance ruling must be submitted in FORM GST ARA-01, along with a fee of ₹ 5,000.
The decision of the authority
The authority has the authority to accept or reject the application by order.
Will all applications be allowed?
The authority will not accept the application if the following conditions are met:
- The applicant has already been adjudicated on the same issue in another case
- The applicant is already involved in a case involving the same issue.
Only after an opportunity to be heard will applications be rejected. Written reasons for rejection must be provided.
The decision on the advance ruling will be made within 90 days of the application. If the Authority members disagree on a point, the matter will be referred to the Appellate Authority.
On whom will the advance ruling apply?
Only the applicant and the jurisdictional tax authorities in respect of the applicant will be bound by the advance ruling. If the law or facts that were the subject of the original advance ruling change, the advance ruling will no longer be valid.
If the applicant is dissatisfied with the advance ruling, he may file a complaint with the appellate authority.
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