Advance Ruling

Let us understand the importance of Advance Ruling.

Advance Ruling is a decision provided by the Authority to an applicant  on following matters or questions:-

1) Classification:-  if there is any ambiguity   of classification of  any Goods or Services.

2) Notification :-The applicability of a notification issued under provisions of the Act, the same is having a bearing on the Rate of Tax

3) Registration:- Whether applicant is required to be registered under the Act.

4) Input Tax Credit :- Admissibility of input tax credit of tax paid or deemed to have been paid.

5) Principles:- The Principles or method to be adopted for determination of value of goods or services under the provisions of the Act.

Procedure:-

a) The applicant should make an application  before AAR in prescribed format. 

b) After receiving the application , the AAR will send a copy of the application to the officer in whose jurisdiction the applicant falls and call for all relevant records.

c) The AAR, will review the application and pass such order as it deem fit ( accept or reject the application ).

The main purpose of setting up of Advance Ruling Authority is  :-

1) it helps in reducing Litigation.

2) To give certainty in Tax liability in advance in relation to an activity proposed to be undertaken by the applicant. So that the applicant is sure of the Tax liability, while planning or taking his business decision.

3) As there will be certainty in Tax liability, it will attract FDI.

4) This is Transparent and Inexpensive.

The Authority under Advance Ruling are :-

AAR :- Authority for Advance Ruling.

AAAR:- Appellant Authority for Advance Ruling.

Important Point to be noted:-

1) We have to understand that Advance Ruling will be applicable to that applicant only and others can't take the benefit of the same.

2) Its applicable until the law is amended or facts or circumstances supporting advance ruling has changed.

3) If the advance ruling is taken on the basis of fraud or misrepresentation, then it will be void.

4) The application can be rejected by AAR  when the question raised is already pending  or its decided in applicant case by the first appellant authority, Tribunal or court

5) The AAR is bound to pronounce its ruling within 90 days.

6) The  AAR before pronouncing the Ruling has to hear the applicant and the Jurisdictional officers.

7) if there is difference of opinion between the members of AAR, then it refer the matter to AAAR, if AAAR members also differs, then there will be no Advance Ruling in the matter.

8) The Ruling given by AAR can be appealed to AAAR by the applicant or  Jurisdictional officer.

7) The order given by the AAR or AAAR can be rectified/ amended  within 6 months

When there is ambiguity in the interpretation of Law or any notification, its better to go for advance ruling before taking any major decision, As it will safeguard the assessee from tax liability, litigation.