Advance Ruling
A businessman would like to be clear in his mind about various aspects of his venture and risks involved, before he starts a new business or adventure. He would like to get clear verdict about his doubts in respect of taxation matters, before he decides to venture in the new business. Otherwise, he may be exposed to certain unexpected risks which may have serious adverse consequences and his business may even fail. Hence, provisions of advance ruling were made in 1993 in Income Tax Act vide sections 245N to 245R.
Advance ruling brings certainty in determining duty liability and it helps in avoiding long drawn and expensive litigation at a later date.
Similar provision of ‘advance ruling’ in respect of indirect taxes was made in 1999 so that the manufacturer/producer/importer/exporter is clear about legal aspects. The provisions were extended to service tax in May 2003. The provisions are contained in sections 23A to 23H of Central Excise Act, 1944, sections 28E to 28L of Customs Act, 1962 and sections 96A to 96-I of Finance Act, 1994 (in respect of service tax).
Now, similar provision is made in GST also.
The Authority for Advance Ruling will give a decision on question raised before it. Such ruling will be binding on the applicant and the department.