Gst Provisions For Startups and Small business

Advance Ruling Provision under GST

  • What is Advance Ruling?

Advance Tax ruling is a written understanding of tax laws which is issued by taxation authorities to corporations and individuals for provides clarifications of certain tax matters. An Advance ruling is often demanded when the taxpayer is confused or uncertain about certain provisions. Before starting the proposed activity advance ruling is applied.

For example, under income tax, the advance ruling is available for international transactions. This is to help non-residents ascertain the income-tax liability, plan their income-tax in advance and avoid long drawn and costly legal disputes.

With regards to GST, the advance ruling is the conclusion in writing given by the taxation authorities to an applicant related to the supply of goods/services.

  • The requirement of Advance Ruling:

The objective of Advance Ruling under GST is to:

  1. Provide certainty in working out the tax liability in advance related to the future activity which is to be undertaken by the applicant.
  1. In the case of Foreign Direct Investment, advance ruling helps to clarify taxation and showing a clear picture of the future tax liability. This also enables the non-residents to get a clear picture of taxation who are not willing to get involved in messy tax disputes.

  1. Reduce litigation and cost of legal disputes
  1. Gives decisions in a timely, transparent and inexpensive manner.

  • When can one request for Advance Ruling?

Any taxpayer who is uncertain about the provisions can seek an advance ruling. Advance ruling can be sought in the following cases:

  1. Classification of any goods and/or services under the Act
  2.  Applicability of a notification which affects the rate of tax.
  1.  To determine the time and value of the supply of goods/services

  1.  Whether input tax credit paid (or deemed to be paid) will be allowed
  1. Determination of the liability to pay tax on any goods/services
  1.  Whether the applicant has to be registered under GST 
  1.  Whether any particular action to be taken by the applicant regarding goods/services will result in a supply. 
  • Process of Advance Ruling under GST:
  1. An application for Advance Ruling is made to the Advance Ruling (Authority) in Form No. GST ARA -01 along with the prescribed fees of Rs.5000/-.
  1. On receipt of the application, the copy of the same shall be forwarded to the prescribed officer who will furnish the necessary relevant records.

  1. On the verification of the application and necessary conditions, the authority will either accept or reject the application. However, in certain cases the authority will not admit the application:
  1. The same matter or topic which is already been decided in an earlier case for the applicant
  2. The same matter or topic which is already pending in any proceedings for the applicant.
  1. Also, the application will be rejected only after giving an opportunity of being heard for which the reasons shall be in writing.
  1. Once the application is accepted the authority of Advance Ruling has to give its decision within 90 days from the application. If the members of the Authority of Advance Ruling differ in opinion at any given point of time, they will refer the point to the Appellate Authority.

Kindly note that the decision of the Advance Ruling will effect prospectively.

  • To whom the decision of Advance Ruling shall apply?

The advance ruling will be binding only –

  1. On the applicant 
    (b) On the jurisdictional tax authorities in respect of the applicant.

If the law changes the facts of the original advance ruling also change then in such a case the advance ruling will not apply.

  • Application to Appellate Authority:

If the applicant who has made the application is aggrieved by the advance ruling decision he can appeal to the Appellate Authority.

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