Advance Ruling Under GST: Your Key to Clarity and Compliance!

When it comes to GST, uncertainty can be costly. Imagine launching a new product or service and later discovering that your tax classification was incorrect—leading to penalties, interest, or disputes with tax authorities. This is where Advance Ruling steps in, offering a way for businesses to get clarity before stepping into uncertain tax waters.

But what exactly is an Advance Ruling, and how does it shape GST compliance? Let’s break it down using the law itself.

What is an Advance Ruling?

Under Section 95(a) of the CGST Act, an Advance Ruling is a decision issued by the Authority for Advance Ruling (AAR) or the Appellate Authority for Advance Ruling (AAAR) on specific tax matters related to the supply of goods or services specified u/s 97(2) or 100(1).

What makes it so powerful?

• It applies to transactions already being undertaken by the applicant, and

• Even to those yet to be undertaken!

This forward-looking approach means businesses can get tax clarity before signing a contract or raising an invoice, ensuring they make informed decisions without worrying about unexpected GST liabilities.

Who Can Apply?

As per Section 95(b) of the CGST Act, an applicant is any person who is:

• Registered under GST, or

• Intending to obtain GST registration.

Interestingly, even those who are unsure about their GST registration requirement can apply to determine whether they need to register under the law.

Composition of the Authority for Advance Ruling

As per Rule 103 of the CGST Rules, the Government appoints officers not below the rank of Joint Commissioner as members of the Authority for Advance Ruling (AAR). Additionally, Section 96 of the CGST Act states that the AAR constituted under the respective SGST or UTGST Act serves as the authority for issuing advance rulings within that State or Union Territory.

For example, each state has its own AAR, such as the Haryana Authority for Advance Ruling (HAAR).

What Can Be Addressed Through an Advance Ruling?

Taxpayers often seek guidance on various aspects of GST. However, Advance Ruling is limited to a specific set of issues and does not cover everything. Under Section 97(2), an Advance Ruling can be sought on the following key matters:

• Classification of goods or services

• Applicability of a notification

• Determination of time and value of supply

• Admissibility of input tax credit (ITC)

• Determination of Liability to pay tax

• Requirement for GST registration

• Whether a transaction amounts to a ‘supply’

Since the matters eligible for Advance Ruling are explicitly listed, the scope is exhaustive—queries beyond these topics will not be entertained.

This also means that certain critical tax concerns—such as the nature of tax payable, clarifications on import/export transactions, or determining the supplier’s location—fall outside the AAR’s jurisdiction. As a result, while Advance Ruling helps resolve specific GST-related uncertainties, its applicability remains limited in scope.

The Process of Obtaining an Advance Ruling

Now that we’ve identified the issues that can be addressed through an Advance Ruling, let’s break down the process of obtaining one.

Under Section 95(c) of the CGST Act, an ‘application’ refers to a submission made to the Authority under Section 97(1) to seek guidance on specific GST-related matters.

The application must be filed online using FORM GST ARA-01, as per Section 97(1) read with Rule 104 of the CGST Rules. A mandatory fee of Rs. 5,000 must be paid in accordance with Section 49.

To make the payment, it must follow the guidelines set in Section 49, which specify that any deposit towards tax, interest, penalty, fee, or any other amount must be made using internet banking, card, NEFT, RTGS, or other prescribed modes. Once paid, the amount is credited to the applicant’s electronic cash ledger, from which the fee is then deducted.

Additionally, as per Rule 26, the application—along with all supporting documents—must be digitally signed or authenticated as prescribed.

Shift in the System!

When GST was introduced, there was no facility to file applications for Advance Ruling online. To bridge this gap, CBIC issued Circular No. 25/25/2017-GST, dated 21.12.2017, clarifying that since the requisite forms were not available on the common portal, Rule 107A was introduced via Notification No. 55/2017-Central Tax. This rule allowed manual filing of applications until the online system became operational.

However, with the online facility now in place, the purpose of this circular has been fulfilled, making it redundant.

From Application to Ruling: How the Advance Ruling Process Unfolds

As per Section 98 of the CGST Act, the procedure for processing an Advance Ruling application follows a structured path, ensuring due diligence before a ruling is issued. So, you’ve submitted your Advance Ruling application—what happens next? The process isn’t just about filing a form and waiting for a response. Let’s break it down.

Once the AAR receives an application, it doesn’t jump straight into decision-making. Instead, a copy is forwarded to the concerned officer, who may be asked to provide relevant records. If such records are called for, they must be returned swiftly—no unnecessary delays here!

This is where things get serious. The AAR carefully examines the application, reviews the records, and hears both sides—the applicant (or their representative) and the concerned officer. Then comes the moment of truth: admit or reject.

However, not all questions are eligible for Advance Ruling. If the query is already pending or has been decided in any proceedings involving the applicant, the AAR must reject it outright.

But here’s the catch—an application cannot be rejected without first giving the applicant a chance to be heard. Plus, if rejected, the reasons must be clearly recorded in writing. Transparency is key!

If the application is admitted, the AAR dives deeper. It can consider additional materials, ask more questions, and provide another opportunity for both parties to present their case. After this, it finally issues the much-awaited Advance Ruling on the specified question.

But what if the AAR members can’t agree? In such cases, they shall refer the point or points on which they differ to the Appellate Authority for Advance Ruling (AAAR) for hearing the issue.

The AAR must deliver its ruling within 90 days from the date of application.

5. The Final Word: Certified and Delivered

Once the ruling is pronounced, a duly signed copy is sent to the applicant, the concerned officer, and the jurisdictional officer. But it doesn't stop there Rule 105 of the CGST Rules mandates that this copy must be officially certified as a true copy by any member of the AAR.

This ensures that the ruling holds full legal weight, providing businesses with a clear, authenticated decision they can rely on.

Challenging the Ruling: Taking It to the Next Level

So, what happens if you're not satisfied with an Advance Ruling? Enter the Appellate Authority for Advance Ruling (AAAR)—the next level in the hierarchy. If the ruling by the AAR leaves you scratching your head, or worse, in disagreement, the AAAR provides a way to challenge it. Let’s break down how this process works under Sections 99, 100, and 101 of the CGST Act.

Meet the Appellate Authority (Section 99)

As per Section 99 of the CGST Act, the AAAR constituted under a State or Union Territory GST Act automatically serves as the Appellate Authority for that particular state or UT. This means:

• If a ruling is issued by the AAR in Maharashtra, the Maharashtra AAAR is the next stop for an appeal.

• Likewise, for Haryana, the Haryana AAAR takes charge.

The AAAR is designed to ensure that applicants, as well as tax officers, get a second opinion when an Advance Ruling raises concerns. But who can actually file an appeal? Let's explore.

Section 100: Appeal to Appellate Authority- Challenging the Ruling

Who Can Appeal?

• The applicant (the one who sought the ruling in the first place).

• The concerned officer.

• The jurisdictional officer.

If any of these parties feel aggrieved by the ruling under Section 98(4), they can knock on the doors of the AAAR.

• The appeal must be filed within 30 days from the date the ruling was communicated.

• If there’s a genuine reason for the delay, the AAAR may allow an extension of another 30 days, but no more!

1. For the applicant – The appeal must be filed online via common portal using FORM GST ARA-02, along with a fee of Rs. 10,000(to be paid as per Section 49).

2. For the concerned officer or jurisdictional officer – Their appeal is filed via FORM GST ARA-03, but here’s an interesting point—government officers don’t have to pay a fee for filing an appeal.

3. Signature & Verification –

• If the appeal is filed by the concerned officer or jurisdictional officer, it must be signed by an authorized officer.
• If filed by an applicant, it must be digitally signed as per the rules prescribed in Rule 26 of the CGST Rules.

Now, what happens when an appeal is filed? The AAAR steps in!

Section 101: Orders of Appellate Authority- The Final Call

Once the appeal is filed or a reference made to AAAR in case of conflict of opinion amongst AAR (section 98(5)), it’s time for the AAAR to make a call. Here’s how the process unfolds:

Hearing and Decision

• The AAAR listens to all sides—the applicant, tax officers.

• After hearing arguments and examining the details, it has two options:

1. Confirm the ruling (if the AAR’s decision was spot-on).

2. Modify the ruling (if corrections are needed).

❖ Deadline for Decision- The AAAR must deliver its ruling within 90 days from the filing of the appeal or a reference.

☠ What If the AAAR Members Disagree? Unlike a courtroom where the judge gives a final verdict, the AAAR must decide matters unanimously. But if its members differ on any point in an appeal or reference, then it shall be deemed that no advance ruling can be given in respect of the question on which difference persists at the level of AAAR.

❖ Certified Copies for Everyone! Once the ruling is finalized, a certified copy of the decision is sent to (Read with Rule 107):

• The applicant and appellant.

• The concerned officer of central tax and state/UT tax.

• The jurisdictional officer of central tax and State or Union territory tax; and

• The Authority for Advance Ruling (AAR)—so they stay in the loop.

Section 102: Rectification of Advance Ruling – Fixing Errors

Even the best rulings can sometimes contain errors. Section 102 allows the Authority or the Appellate Authority to correct any mistake that is apparent on the face of the record.

Who Can Spot Errors?

Errors can be rectified if they are noticed by:

• The Authority or Appellate Authority on their own.
• The applicant.
• The concerned or jurisdictional officer.
• The appellant.

Time Limit for Rectification- Any rectification must be done within six months from the date of the order.

☎ What If the Correction Increases Tax or Reduces ITC? If the rectification leads to higher tax liability or a reduction in admissible ITC, the affected applicant/appellant must be given a chance to be heard before any changes are made.

Section 103: The Binding Effect – But Not for Everyone!

So, you’ve got an Advance Ruling—does that mean it’s now the law of the land? Not quite!

An Advance Ruling is binding, but only on two specific parties:

✓The applicant - The one who sought the ruling in the first place.

✓The concerned officer or jurisdictional officer in respect of the applicant.

Sounds straightforward, right? Well, here’s the catch:

It’s NOT a precedent for everyone else!

An Advance Ruling does not bind other taxpayers, other officers, or even other states. If a different taxpayer has the exact same issue, they can’t cite your ruling as a binding precedent—they’ll have to apply separately. 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.

Even if a ruling is binding at first, it’s not forever. The moment any of these things change, the ruling loses its authority:

❖ A change in law – If GST law or rules change, the ruling becomes outdated.

❖ A change in facts – If the applicant’s business structure or transaction details change, the ruling no longer applies.

❖ A change in circumstances – Any new developments that alter the basis of the ruling can render it invalid.

In short, an Advance Ruling is like a custom-fit suit—it’s made specifically for the applicant and their tax officer, and if things change, it may no longer fit!

Section 104: When an Advance Ruling Becomes Void – The Fine Print!

Imagine you get an Advance Ruling, and everything seems settled. But what if later, the tax department finds out that something was hidden or misrepresented? Well, in such cases, the ruling can be declared void ab initio- meaning it’s treated as if it never existed in the first place!

The ruling will be void if the AAR or the AAAR discovers that:

☒The ruling was obtained by fraud.

☒Crucial facts were misrepresented.

☒There was suppression of material information.

If any of these conditions are met, the ruling immediately loses its validity, may, by order, declare such ruling to be void ab-initio and thereupon all the provisions of the CGST Act or the rules made thereunder shall apply to the applicant or the appellant as if such advance ruling had never been made (but excluding the period when advance ruling was given and up to the period when the order declaring it to be void is issued).

In short, honesty is key when seeking an Advance Ruling—because if it turns out the ruling was based on incorrect or incomplete facts, it can be completely erased!

Disclaimer: The information given in this article is solely for purpose of understanding the law. It is completely based on the interpretation of the author and cannot be constituted as a legal advise, the author of this article and Lawcrux team is not responsible for any legal issues if arises on the basis of the interpretation given above.