07 Jun 2018Posted By: Mudit Handa

Why has Government decided to revamp the Advance Ruling Mechanism under GST?

The Goods and Service Tax is indeed one of the most simplifying and ergonomic reforms in the realm of indirect taxation in India that has eased the burden of intriguing taxes from the common man’s shoulders. Nevertheless, the system has constantly witnessed slight stoppages due to the conceptual naivety of the taxpayers who have undergone New GST registration.

This is true in the case of GST Return Filing, where the system is under the constant amendment. An average taxpayer who is oblivious of the new policy measures under GST finds himself entangled in the cobweb of conflicting taxation laws.

The GST Council in this regard has sought to minimize such hassles by making a noteworthy amendment in the CGST Act-2017, wherein it will be mandatory for the Authority for Advance Rulings (AAR) at the state level to be chaired by senior revenue officials.

In order to be able to comprehend the objective of this amendment, it’s important to know the fundamentals of this concept.


#1. What is the concept of Advance ruling under GST?

‘Advance ruling’ mechanism under GST refers to a decision taken by the constituted authority, at the request of an applicant on issues or disputes arising against any provisions under the CGST Act 2017. The objective of this mechanism is to rule out all ambiguities and fairly determine the tax liability.


#2. Who is the constituted authority in this case?

Here the constituted authority refers to any officer appointed under the constitution for intermediating in the cases concerning the issues of general public such as the old and obsolete laws of the erstwhile Indirect Tax regime, or the uncertain provisions in the current (GST) regime that might result in uncertainty of tax liability.


#3. Who can apply for an Advance ruling under GST?

The advance ruling can be obtained by a registered taxpayer (i.e. who has a GST Registration certificate) on a current transaction, i.e. The transaction that has already undertaken or a proposed transaction.


#4. Why is AAR headed by senior staff?

The intent behind this system to avoid contradictory AAR rulings by its different benches and to make sure the orders are based on sound and uniform legal principles.


#5. What was the scenario of AAR before the introduction of GST?

In the erstwhile Indirect Tax regime, the Authority for the Advance Ruling (AAR) was headed by the retired Supreme Court judges accompanied 2 technical members. After the recent amendment u/s. 96 of CGST Act 2017, the AAR will no longer comprise of former judicial officers. Instead, it will be headed by senior revenue officials.


#6. What is the reason behind of GST council’s decision of AAR to be headed by revenue staff?

It was reported by experts that several states had formed the AARs as per the respective State GST Acts at the beginning of this year, but numerous rulings so far were biased on revenue grounds and were also not reliable on legal grounds. The motive behind the recent decision of GST council regarding AAR being sans-judicial is to do away with the revenue bias.  


#7. What are other proposals regarding AAR as per the recent amendment?

Apart from the reforms discussed above,

  • It has been reported that GST Council may set up a centralized AAR to pass judgment in case of contradictory AAR rulings by 2 states.  

For example, in case a petition has been filed by a construction contractor, whose case falls under the category of Public Works Contract, Maharashtra AAR says that such contracts attract 18% GST while Karnataka AAR mandates 5% GST. This would impact in a policy paralysis. A centralized AAR would intermediate and prevent such situation.

  • Besides, an AAR would consist of one official of CGST and one of SGST. Earlier, it was mandatory to have 1 IRS Officer in AAR, who must have qualified to be the member of CBIC.

These policy measures are sure to enhance the buoyancy in the taxation system. Further, these will minimise the confusions in GST Laws among those who have gone through new GST registration.    


In case you require any other guidance concerning GST registration in India, feel free to contact us at 8881-069-069.


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