Introduction Of Advance Ruling :
Obtaining an advance ruling helps the applicant in planning his activities which are liable for payment of GST, well in advance. It also brings certainty in determining the tax liability, as the ruling given by the Authority for Advance Ruling is binding on the applicant as well as Government authorities. Further, it helps in avoiding long drawn and expensive litigation at a later date. Seeking an advance ruling is inexpensive and the procedure is simple and expeditious. It thus provides certainty and transparency to a taxpayer with respect to an issue which may potentially cause a dispute with the tax administration. A legally constituted body called Authority for Advance Ruling (AAR) can give a binding ruling to an applicant who is a registered taxable person or is liable to be registered. The advance ruling given by the Authority can be appealed before an Appellate authority for Advance Ruling (AAAR). There are time lines prescribed for passing an order by AAR and by AAAR.
Concept of Advance Rulings under Revised Kyoto Convention of World Customs Organisation (WCO) and under WTO Agreement on Trade Facilitation
Standard 9.9 of the Revised Kyoto Convention, which is the International Convention on the Simplification and Harmonization of Customs procedures and was adopted in June, 1999 as a blueprint for modern and efficient Customs procedures in the 21st century, deals with Advance Rulings. It states as under:-
“The Customs shall issue binding rulings at the request of the interested person, provided that the customs have all the information they deem necessary”.
Further, the WTO Agreement on Trade Facilitation signed on 6 December, 2013 at Bali, Indonesia, under Article 3, makes it obligatory for the member countries to have mechanism of Advance Ruling.
The Article 3 of the Agreement on Trade Facilitation reads as under:-
ARTICLE 3: ADVANCE RULINGS
1. Each Member shall issue an advance ruling in a reasonable, time bound manner to an applicant that has submitted a written request containing all necessary information. If a Member declines to issue an advance ruling, it shall promptly notify the applicant in writing, setting out the relevant facts and the basis for its decision.
2. A Member may decline to issue an advance ruling to an applicant where the question raised in the application:
(a) is already pending in the applicant’s case before any governmental agency, appellate tribunal or court; or
(b) has already been decided by any appellate tribunal or court.
3. The advance ruling shall be valid for a reasonable period of time after its issuance unless the law, facts or circumstances supporting the original advance ruling have changed.
4. Where the Member revokes, modifies or invalidates the advance ruling, it shall provide written notice to the applicant setting out the relevant facts and the basis for its decision. Where a Member revokes, modifies or invalidates advance rulings with retroactive effect, it may only do so where the ruling was based on incomplete, incorrect, false or misleading information.
5. An advance ruling issued by a Member shall be binding on that Member in respect of the applicant that sought it. The Member may provide that the advance ruling be binding on the applicant.
6. Each Member shall publish, at a minimum:
(a) the requirements for the application for an advance ruling, including the information to be provided and the format;
(b) the time period by which it will issue an advance ruling; and
(c) the length of time for which the advance ruling is valid.
7. Each Member shall provide, upon written request of an applicant, a review of the advance ruling or the decision to revoke, modify or invalidate the advance ruling.
8. Each Member shall endeavour to make publicly available any information on advance rulings which it considers to be of significant interest to other interested parties, taking into account the need to protect commercially confidential information.
9. Definitions and scope:
(a) An advance ruling is a written decision provided by a Member to an applicant prior to the importation of a good covered by the application that sets forth the treatment that the Member shall provide to the good at the time of importation with regard to:
(i) the good’s tariff classification, and
(ii) the origin of the good.
(b) In addition to the advance rulings defined in subparagraph a, Members are encouraged to provide advance rulings on:
(i) the appropriate method or criteria, and the application thereof, to
be used for determining the customs value under a particular set of facts;
(ii) the applicability of the Member’s requirements for relief or exemption from customs duties;
(iii) the application of the Member’s requirements for quotas, including tariff quotas; and
(iv) any additional matters for which a Member considers it appropriate to issue an advance ruling.
(c) An applicant is an exporter, importer or any person with a justifiable cause or a representative thereof.
(d) A Member may require that an applicant have legal representation or registration in its territory. To the extent possible, such requirements shall not restrict the categories of persons eligible to apply for advance rulings, with particular consideration for the specific needs of small and medium sized enterprises. These requirements shall be clear and transparent and not constitute a means of arbitrary or unjustifiable discrimination.