Rulings by AAR and AAAR: Greetings to all ! A legally constituted body called Authority for Advance Ruling (AAR) can give a binding ruling to an applicant who is registered person or is liable to get registered. The advance ruling given by AAR can be appealed before an Appellate authority for Advance Ruling (AAAR).
As per sec 95 of CGST/SGST Act and sec 21 of UTGST Act ‘Advance Ruling means a decision provided by the authority or the appellate Authority to an applicant on matters specified in sec 97(2) or 100(1) of CGST/SGST Act as the case may be, in relation to a supply of goods or services supplied or proposed to be supplied.
Matters specified in section 97(2) and 100(1):
- Classification of goods or services or both.
- Applicability of notifications issued.
- Determination of time/value/place of supply.
- Admissibility of ITC.
- Requirements to get registered or Determining of Turnover threshold.
- Whether any actions on goods or services or both results in a term of ‘Supply’ or not.
Binding Effect :
Section 103 provides that an advance ruling by AAR and AAAR shall be binding on both the applicant and jurisdictional tax authority of the applicant. It is only limited to the person who has applied for an advance ruling and not to any other similarly placed taxable person in the state. Even advance ruling is binding only in respect of matters referred. It has no precedent values. However even for persons other than applicant, it is persuasive and not the conclusive.
What if applicant is aggrieved by the Advance ruling?
As we see, CGST/SGST Act do not provide any remedy against the ruling of AAAR and thus ruling of AAAR becomes conclusive under GST Law for the applicant and tax authorities. However, vide amendment through Finance Act, 2019 advance ruling also includes ‘National Appellate Authority for Advance Ruling’ (NAA). Where conflicting advance rulings are given by AAAR of two or more states or union territories or both, any officer authorised by commissioner or an applicant being distinct person as per Sec 25, aggrieved by such advance ruling may prefer an appeal to NAA.
Ruling by NAA will be binding on all registered persons having same PAN of the applicant and concerned authorities. But in other case, there is no alternative option. In recent time, we see that many controversial rulings have been passed. Though rulings are binding in the case of applicant only but can signifies the perspective of the authorities towards the issue. Following are some rulings which may have caused natural injustice to the applicant.
1. GST on Director’s Remuneration under Reverse Charge Mechanism. In the case of M/s Clay Craft India Pvt. Ltd. AR No RAJ/AAR/2019-20/33 dated 20/02/2020 and in the case of M/s Alcon Consulting Engineers (India) Pvt. Ltd. AR No. KAR ADRG 83/2019 dated 25.09.2019 it was held that GST is applicable under reverse charge mechanism on the consideration paid in any head to the directors. It is to be noted that afterwards clarification on such issue has been provided through Circular No. 140/10/2020-GST dated 10.06.2020.But in case what if circular had not been issued.
2. Supply of goods to the customers located outside India under ‘Bill to Ship to’ Model from the vendor located outside India. In the case of M/s Sterlite Technologies Ltd. AR No. Advance Ruling/SGST&CGST/2018/AR/31 dated 17.03.2020 ruling came out that GST is payable on goods sold to customers located outside India, Where goods are shipped directly from the vendor’s premise (located outside India) to the customer’s premise(located outside India).
While going through the facts and matters of the ruling, It is seen that AAR has no where mentioned about the amendment in Schedule III of CGST Act, 2017 para 7 was inserted which clearly states that “Supply of goods from a place in the non taxable territory to another place in the non taxable territory without such goods entering into India shall be treated neither as a supply of goods nor services and hence not liable to GST”
Applicability of such amendment
Now the question arises to the applicability of such amendment. As applicant applied for such ruling on 24.05.2018 and amendment came in force w.e.f 01.02.2019.Some judgements states that any amendment in the Act, which is clarificatory in nature should have retrospective effect. Now it also depends on the perspective of the individual whether to treat this amendment as clarificatory or as a new insertion. Hence, Applicant should cautiously examine the material facts of the issue before filing an application for Advance Ruling.
To, the applicant who is aggrieved by the ruling of AAAR, has no option other than to seek remedies provided by the constitution of India (i.e Writ petition) in cases where AAAR goes beyond its jurisdictional limits, breach of principles of natural justice, committing errors of law, involves question of law, solely relying on the material facts without going into the question of law etc. Applicant can file writ petition under Article 226, Constitution of India before the Honourable High Court for the breach of principal of natural justice by AAAR. If any judgement of High Court is available on similar cases, it must be construed in the similar manner to serve a justice.
The honourable Bombay High Court in the matter of JSW Energy Ltd [2019-VIL-276-BOM] held that, “The court declined to examine the merits of the case, merely because the GST Law did not provide for any appellate mechanism against an order of AAAR. The case was remanded back to the AAAR for fresh consideration on merits and in accordance with the law. The court further noted that any attempt of examining the merits of case would tantamount to converting proceeding under Article 226 of the Constitution of India, which are essentially proceedings to seek judicial review, into an appellate proceedings.
Hence, before filing writ petition, the presentation of the subject matter involving question of facts-question of law must be in systematic and proper format.