WHAT IS AN ADVANCE RULING? - Handbook of GST Law & Procedures (CBIC) [October 2024] - GST

2. WHAT IS AN ADVANCE RULING? 2.1. Advance ruling means a decision provided by the Authority or the Appellate Authority to an applicant on matters or on questions, viz., classification of any goods and/or services, applicability of a notification, determination of time and value of supply of goods and/or services, admissibility of input tax credit of tax paid or deemed to have been paid, determination of the liability to pay tax on any goods and/or services, whether applicant is required to be registered or whether any particular thing done by the applicant with respect to any goods and/or services amounts to a supply. 2.2. The definition of Advance ruling given under the Act is a broad one and an improvement over the existing system of advance rulings under Customs and Central Excise Laws. Under GST, Advance ruling can be obtained for a proposed transaction as well as a transaction already undertaken by the appellant. 2.3. The broad objectives for setting up a mechanism of Advance Ruling are: Provide certainty in tax liability in advance in relation to an activity proposed to be undertaken by the applicant. Reduce Litigation. Pronounce ruling expeditiously in a transparent and inexpensive manner. 2.4. An advance ruling pronounced by AAR or AAAR shall be binding only on the applicant who has sought the advance ruling and on the concerned officer or the jurisdictional officer in respect of the applicant. This clearly means that an advance ruling is not applicable to similarly placed other taxable persons in the State. It is only limited to the person who has applied for an advance ruling. 2.5. The law provides that advance ruling shall be binding till the period when the law, facts or circumstances supporting the original advance ruling have not changed. 2.6. However, an advance ruling shall, by an order passed by the AAR/AAAR, be declared to be ab initio void if the AAR or AAAR finds that the advance ruling was obtained by the applicant by fraud or suppression of material facts or misrepresentation of facts. In such a situation, action warranted as per the provisions of the CGST/SGST Act, 2017 for recovery of tax short paid or not paid, if any, shall apply to the applicant. The period when advance ruling was given up to the period when this ruling was declared void has to be excluded while taking such action. 2.7. An order declaring advance ruling to be void can be passed only after providing an opportunity of hearing to the applicant.