Section 96 of GST – Authority for advance ruling
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Section 96 of GST – Authority for advance ruling
Subject to the provisions of this Chapter, for the purposes of this Act, the Authority for advance ruling constituted under the provisions of a State Goods and Services Tax Act or Union Territory Goods and Services Tax Act shall be deemed to be the Authority for advance ruling in respect of that State or Union territory
Analysis of this section
The Authority for advance ruling constituted under provisions of a State GST Act or UTGST Act shall be deemed to be the Authority for advance ruling in respect of that State or Union territory.
The AAR shall be located in each State/Union Territory constituted under the provisions of State Goods and Services Tax Act and Union Territory Goods and Services tax Act. The Government shall appoint officers not below the rank of Joint Commissioner as member of the Authority for Advance Ruling.
As per Section 96 of the State GST Acts, the State Government may, on the recommendation of the Council, notify any AAR located in another State to act as the Authority for Advance Ruling for the State.
Further, the AAR shall consist of one member from amongst the officers of Central tax and one member from amongst the officers of State tax, to be appointed by the Central Government and the State Government respectively. The qualifications, method of appointment of the members and the terms and conditions of their services shall laid down in the SGST Rules.
As the AAR and the Appellate Authority have been instituted under the respective State / Union Territory Act and not the Central Act, the ruling given by the AAR and AAAR will be applicable only within the jurisdiction of the concerned state or union territory. Thus, an advance ruling in case of an applicant in Kerala cannot be made applicable to another division of the same company located in Karnataka. This has the potential to create an absurd scenario where the jurisdictional officer of the division located in Karnataka may choose not to abide by the Advance Ruling issued by the Kerala AAR to another division of the same company in Kerala. Similarly, a situation may also arise wherein the Authority for Advance Ruling in different States may conclude differently in respect of the same issue. Since the advance ruling is binding on the concerned officer or the jurisdictional officer only in respect of the applicant, the above mentioned officers may apply the law in a different manner with respect to another registered person under his jurisdiction. As such it is strongly suggested that a centralised appellate authority be constituted to assure uniformity across India.
Suppose, a company is having multiple registrations across India, it has applied for advance ruling in two different states on the same issue. How will the company account for the issue, if the decisions of the two authorities are contradictory to each other.
It is important to note that the members of the AAR are appointed from the lot of departmental officers, be it the CGST representative or the SGST representative. These officers who decide upon matters relating to taxability of a transaction, liability of the assessee, registration requirements and other matters stated in Section 97(2) ‘are themselves a creation of the system’. Such is the nature of the constitution of the AAR or the Appellate Authority that the very same officers who have interpreted the law in favour of tax collections will now sit in judgement on matters of levy, taxability and liability. Hence before applying for an advance ruling, the applicant must appreciate the fact that the members of the AAR or the Appellate Authority cannot question the vires of the provisions of the GST law. It would not be wrong to say interpretations of the members might be prejudiced by their experiences and understanding as tax officers which could cloud the rulings and decisions given by them. To this extent it can be said that the AR and AAR are both biased with only department officers appointed as members of AR. It is suggested that a person from the judiciary should be accommodated both in the AAR and the AAAR and the strength of the AAR and the AAAR should be increased to three, so that a situation shall never arise where a decision cannot be taken due to difference in opinion of the members of the AAR or the AAAR.
Thus, it is important for an applicant to weigh his options before seeking an Advance Ruling however attractive a proposition it may seem to be. Given that Section 103 states that an advance ruling shall have a binding effect on the applicant and the officers in respect of the applicant, the applicant should analyse the impact of an advance ruling not going in his favour. Would it be more beneficial for the assessee to litigate the matter in the Court of law as and when the need arises as against submitting himself before the AAR (previously, tax officers) which would involve baised decision and disclosing his business model, books of accounts and other material facts requiring examination.
Under the erstwhile laws, there was only one AAR for three Central indirect tax laws i.e. Central Excise, Customs and Service Tax constituted by the Central Government under section 28F of the Customs Act, 1962 having its office in Delhi. Under the GST law, there will be one AAR in each State or Union Territory because the concept of advance ruling is being made applicable to SGST laws/ UTGST laws as well.
The composition of the AAR in the erstwhile law consisted of one judicial member as part of the authority. However, there are only two members in the GST AAR consisting of one member from the state and one from the centre, both being officers of the GST regime.
Q1. Where will the office of AAR be situated?
Ans.The office of the AAR will be situated in each State/UT. However, the State Government, on the recommendation of the Council, may notify any AAR located in another State to act as the Authority for Advance Ruling for the State.