Section 97 of GST – Application for advance ruling

Section 97 of the CGST Act lays down the provisions related to the application for an advance ruling. This mechanism offers clarity to taxpayers on various aspects of GST before they undertake a transaction. It helps avoid future litigation and ensures compliance with the law. But how exactly does Section 97 work? Let’s break it down through key questions.

Who Can Apply for an Advance Ruling Under Section 97 of the CGST Act?

Any registered or unregistered person under GST, known as the “applicant”, can apply for an advance ruling. The ruling provides clarity on specific matters or questions related to the supply of goods or services. The application must be submitted in the prescribed form, along with the requisite fee, as notified by the government.

What Kind of Questions Can Be Asked in an Advance Ruling Application?

Section 97(2) of the CGST Act clearly defines the types of questions for which an advance ruling can be sought. These include:

1. Classification of Goods or Services

Applicants can seek clarity on whether a particular item falls under a specific HSN code or SAC for determining the applicable GST rate.

2. Applicability of a Notification

The applicant may ask whether a certain notification issued under the CGST Act is applicable to their case or business scenario.

3. Time and Value of Supply

This pertains to determining the exact time and monetary value at which a supply is considered to have been made, which directly impacts tax liability.

4. Admissibility of Input Tax Credit (ITC)

Taxpayers can inquire whether they are eligible to claim ITC on tax already paid or deemed to have been paid, ensuring they comply with ITC rules.

5. Determination of Tax Liability

This includes seeking guidance on whether a particular supply is taxable and, if so, to what extent and at what rate.

6. Requirement for Registration

A person can request a ruling to determine whether they are required to register under GST based on their business activities.

7. Whether a Transaction Constitutes a Supply

Applicants may ask whether a specific act or transaction qualifies as a “supply” under GST, which is the taxable event.

Why Should a Taxpayer Opt for an Advance Ruling?

Advance rulings provide legal certainty to taxpayers and reduce disputes between the taxpayer and the tax authorities. Here’s why opting for it is beneficial:

• Pre-transaction clarity helps in making informed business decisions.

• It ensures compliance with GST law and prevents unintended violations.

• It aids in reducing litigation and penalties due to misinterpretation of tax laws.

What Is the Process to Apply for an Advance Ruling?

The application for an advance ruling under Section 97 must be submitted to the Authority for Advance Ruling (AAR) in the prescribed form (usually Form GST ARA-01), along with the necessary documents and prescribed fee. The procedure includes:

1. Submission of application

2. Review and admission of the application by the AAR

3. Hearing and examination

4. Issuance of the advance ruling within 90 days

Is the Advance Ruling Binding?

Yes, an advance ruling issued under Section 97 is binding on:

• The applicant who sought the ruling

• The jurisdictional tax authority concerned with the applicant

However, it is not binding on other taxpayers or tax jurisdictions.

Can an Advance Ruling Be Appealed?

Yes. If either the applicant or the tax authority is aggrieved by the ruling, they can appeal to the Appellate Authority for Advance Ruling (AAAR) within the prescribed time limit.

Conclusion

Section 97 of the CGST Act plays a vital role in strengthening the GST compliance framework. By allowing applicants to seek advance rulings on specific tax matters, it promotes transparency and helps businesses make decisions with greater confidence. Whether it’s a question of classification, eligibility for ITC, or tax liability, the advance ruling mechanism under Section 97 is an effective tool for proactive tax planning.