AAR (Authority for Advance Rulings) Under GST with Mechanism

An Authority for Advance Rulings (AAR) is a platform to resolve the doubts regarding Goods and Services Tax on questions specified under the CGST act. The definition of an Advance ruling is described in subsection (2) of section 97 or subsection (1) of section 100 of the CGST Act, 2017, regarding the supply of goods and services proposed to be undertaken by the applicants. Under GST, an Advance ruling can be applied to a proposed transaction and on an already undertaken transaction.

Latest Update in Advance Ruling

18th July 2022

• The Authority for Advance Ruling ( AAR ) of Chennai has ruled that no GST (Goods and Services Tax) levy on the examination centre, pre-printing items, scanning and results in processing. read order

Here, we have briefly described the AAR objectives, powers vested to AAR, questions specified in the limit of AAR and procedure to claim the amendments in an order issued by AAR:

Objectives of Authority for Advance Rulings:

• AAR provides advanced security in relation to an activity proposed to be completed by the applicant
• AAR easies norms and so attracts Foreign Direct Investment (FDI)
• Reduce the issues of Litigation
• Mark the ruling efficiently in a manner of transparent and inexpensive

Questions Specified in Section of CGST Act, 2017:

• Classifications of goods and services or both under CGST Act
• Applicability of issued notification under the norms of CGST Act, 2017
• Dissertation of time and value of supply of goods and services or both
• Availability of Input tax credit of tax paid or to be paid
• Liability to pay tax on goods and services
• Applicability to register under GST
• The particular things which are done in respect to goods and services amount to results in a supply of the goods and services

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Correction of Mistakes Made in Orders:

The law protects the order to amend (if there is any rectification) from the record and it can be done within six months from the inception date of the order. Such mistakes can be brought by the authority or applicant or jurisdictional officers. If the effect of the amendment will result in increasing tax liability or reducing the amount of input tax credit, the applicant must be heard before passing any order with rectification.

Powers Vested With an Authority for Advance Rulings (AAR):

A civil court under Code of Civil Procedure, 1908, for discovery and inspection, vests the power to AAR for examining the applicant on oath and taking interest in the production of books of account and other records. Under section 195 of the Code of Criminal Procedure, 1973, the AAR works as a civil court. The AAR has the power to regulate its own procedure and proceeding in front of AAR is considered to be judicial under section 193, 228 and for the purpose of section 196, of the Indian Penal Code,1860.

Companies Want Authority For Advance Rulings (AAR) In India

In India, Industries have to approach the courts on clarifications regarding any doubts on GST provisions as there is no such kind of council or arbitrary committee to resolve newly incorporated tax scheme. And in the wake of this, some senior officials and companies have requested the government to start AAR as soon as possible.

Due to confliction on certain issues, companies and industries are just dragging the government to the court for resolution. Recently, Singapore based DBS Bank dragged Delhi government and GST Council to the court while there is a total of 10 petitions ongoing in the court relevant to GST based issues. The probability of these kinds of petitions are likely to increase on the Indian government and GST Council and it is required to immediately arrange a system to lessen the chances of such petitions.

Deloitte India’s partner M S Mani has said in a statement that it is necessary to establish an AAR in India immediately as most of the companies want a clarification on the new tax system. Especially, the clarification is related to the place of supply and refund claims under input tax credit. He further says, if the government will delay such establishment, then companies will understand the tax provisions and file the tax by themselves. The repercussion will be a threat from tax officials side to the companies and it will start a fight between them. So, it is very important to inaugurate a platform like AAR in the starting phase of the GST rollout only.

A tax official has advised on the issue that companies should ask the clarification to the government first instead of dragging the matters to the court because the court will answer after taking the suggestions from the tax officials and the government only.

Famous Rice Company Escapes GST Scrutiny

In a turn of events, KHUSHI RAM BEHARI LAL LIMITED  or KRBL, a major rice-exporting firm, has been cleared of charges related to non-transfer of benefits under the Goods and Services Tax (GST) by the  National Anti-Profiteering Authority (NAA). India Gate Basmati rice happens to be one of the flagship products offered by the KRBL group. Reportedly, this is the second consecutive time when the  NAA has ruled in favour of the company. As part of the complain, the second complainant had attached an image that showed printed price rate of the 10-kg packet of ‘India gate Basmati Rice (Mini Mogra)‘ as Rs 540 in August 2017 against the printed price rate Rs 585 for the same quantity in October 2017. The Director General of Safeguards (DGS) which was in charge of investigation found the following key points that went in favour of KRBL or India Gate Basmati.

• The tax rate on packed Basmati rice had been increased from ‘Nil’ to ‘5’ percent after the implementation of GST. Accordingly, KRBL in accordance with government notification paid 5 percent GST with effect from September 22, 2017.
• The ITC availed by the company or the months of September, October and November 2017 was less than the GST liability on outward supplies. Accordingly, the balance or remaining amount was paid in cash.
• During the period, the purchase price of paddy increased by 8.33 percent. The same was confirmed by TAX Invoices.

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In light of the above points, The NAA chairman BN Sharma and other members stated that there appears to be no reason for treating the price fixed by the respondent as a violation of the provisions of the anti-profiteering clause. The order reads,”Due to the imposition of the GST on the above product as well as the increase in the purchase price of the paddy there does not appear to be denial of benefit of ITC as has been alleged by the Applicant as there has been no net benefit of ITC available to the Respondent which could be passed on to the consumers. Accordingly, there is no substance in the application filed”