What is Advance Ruling in GST, & How do you Apply for it?

What is the Advance Ruling in GST?

An advance ruling is a written document that consists of the interpretation of the rulings of advance tax. It refers to a decision provided by the Appellate authority to the applicant on the matter specified in section 97(2) or section 100(1) of the GST Act against the supply of goods and services. These rulings are offered to firms and individuals who want to get clarification on some issues or provisions. In other words, advance rulings guide the taxpayer about the applicability of certain provisions of the GST Act and help them maintain compliance with it.

The advance rulings are provided to the applicant by a legally formulated known as the Authority for Advanced Rulings (AAR).

What are the Objectives of Advance Rulings?

The objectives of advance rulings include -

• Providing clarity about the tax liability beforehand for the applicant’s future activity.
• Clarity on the applicability of the rules and provisions of the GST Act can help attract more FDI (foreign direct investment). It provides a clean and clear picture of the taxation system.
• It reduces the chances of costly legal disputes and litigation.
• It provides the applicant with a personal hearing opportunity to help him clear all his doubts in advance.

What is the Applicability of Advance Rulings?

An advance ruling is applicable to those who have applied to receive an advance ruling. It applies to the -

• Classification of services and goods or both under the GST Act.
• Determining value, time, and supply of goods and services.
• Applicability of a notification that affects the tax rate.
• The input tax credit of tax already paid or deemed to be paid.
• Regarding the requirement for registration of the applicant.
• Determination of tax liability on the goods and services or both.
• Whether a specific transaction is considered a supply of goods or services or both.

How do you apply for advance rulings in GST for GST-registered people?

Below are the steps that you need to follow to apply for advance rulings by GST registered persons under the GST Act -

• Step 1. Login to the GST portal and click on “My Applications” under ‘services > user services.
• Step 2. Select the Application type as application for advance rulings. Now, enter the from date and to date and click on the button ‘new application.’
• Step 3. Select the act under which the advance tax ruling is application is being filed. Select the CGST or SGST option for regular taxpayers and IGST for applicants engaged in providing OIDAR services. You need to deposit Rs.5000 under each act before applying for AAR. If the amount shown in amount to be paid column has any amount, click on ‘Deposit in cash ledger’ to deposit the balance amount and fill the application.
• Step 4. Pay the fee. If the cash ledger does not have sufficient balance, use netbanking/e-banking, NEFT/RTGS or OTC (Over the counter) cash, demand draft or cheque. The details of the tax liability are listed on the ‘create challan’ page. These details cannot be edited. Select a payment mode and click on generate challan. The challan is generated with CIN upon making a successful payment. Click on ‘create application for advance rulings.’
• Step 5. Fill all the necessary fields in the advance ruling application. Upload and attach the supporting documents. Enter the details such as -
  • Correspondence address
  • Nature of activity for which advance ruling is needed
  • Issues for which advance ruling is sought
  • Details of the advance ruling application
  • Upload supporting documents, give declaration and complete verification.
• Step 6. Review the details by clicking on ‘preview’ before clicking on ‘proceed to file.’ the advanced rulings PDF gets downloaded on your computer system.
• Step 7. File your application using either an EVC or DSC. The following takes place upon successful application filing -
  • Application fee is automatically debited from the electronic cash ledger.
  • Application reference number is generated.
  • The application status changes to ‘filed.’
  • The acknowledgement appearing on the window can be downloaded into the computer system.
  • The applicant receives an SMS and an email.

How to Apply for Advance Rulings in GST for Non-GST Registered People?

Not just GST registered individuals, non-GST registered individuals can also apply for advance rulings -

• Step 1. Get a temporary ID on the GST portal and login to the GST portal using this ID.
• Step 2. Create a challan and pay an advance ruling application fee. Note the challan receipt and the CIN.
• Step 3. Download the PDF of the application and take a print out of the same by visiting the GST portal homepage > downloads > offline tools > GST ARA-01 (advance ruling application).
• Step 4. Visit the state authority’s advance ruling office and submit the filled in application along with all the supporting documents and the challan receipt.

How to Appeal Against an Advance Ruling?

A taxpayer is allowed to appeal before the appellate authority within 30 days of communication. Given below are the steps you must follow to submit your appeal -

• Step 1. Login to the GST portal > Services > My applications.
• Step 2. On the left side panel of the case details window, click on the ‘orders’ tab.
• Step 3. Click on the ‘file appeal’ option against the advance ruling order issued.
• Step 4. Select the issue for which you want to file an appeal against the advance ruling. Now follow the same steps as mentioned under ‘advance rulings application for registered and non-registered person.’
• Step 5. Check if the amount to be paid column is nil. If yes, then click on ‘create application for appeal.’
• Step 6. Fill the necessary details and upload the PDF based template along with the supporting documents.
• Step 7. Click on the preview button and review the details entered before clicking on ‘proceed to file.’
• Step 8. Complete filing the appeal using a DSC or an EVC.

The main objective of advance ruling is to provide clarity to the applicants and make sure that there are less chances of disputes. Advance rulings also make it easier to understand and interpret the provisions and allow them to file an advance ruling for planning , in case the transactions are being interpreted. The applicant can also file an application or appeal against the ruling provided with the (AAAR). However, you might get intimidated at just the thought of doing all this on your own. Given the complexity of the process, the best idea is to hire professional CA’s who can help you throughout the process.

Book a tax expert now!