2022 (6) TMI 249 

An insight into Advance Ruling and the functioning of the Authority for Advance Ruling (AAR).

The law makes a comprehensive provision for advance rulings to ensure that disputes are minimal. Timelines are also given within which the ruling is to be given by the concerned authority. The aim is to provide certainty to the tax payer with respect to his obligations under the GST Act and an expeditious ruling, so that the relationship between the tax payer and administration is smooth and transparent and helps to avoid unnecessary litigation.

In the present matter, M/s. Srico Projects Private Limited, Hyderabad, Telangana (Applicant) filed an application for advance ruling. The Applicant is in works contract executing civil works for Central Government Employees Welfare Housing Organization (CGEWHO). Applicant wanted this tax ruling for knowing the rate of tax on works executed for the government. Whether "CGEWHO" is covered under the definition of the term "Government Entity". Further the doubt sought to be cleared related to the tax rate of 12% (CGST: 6% and SGST: 6%).

Broadly the provisions of the CGST Act and TGST (Telangana GST Act) Act are the same except for certain provisions. Under GST, Advance ruling can be obtained for a proposed transaction as well as a transaction already undertaken by the appellant.

Before we try to understand the "Advance Ruling" particularly with reference to the facts of this case, let us understand the general purpose of "Advance Ruling".

Broad objectives of Advance Ruling:

Provide certainty in tax liability in advance in relation to an activity proposed to be undertaken by the applicant;

Attract Foreign Direct Investment (FDI);

Reduce litigation;

Pronounce ruling expeditiously in a transparent and inexpensive manner.

The Applicant enclosed copies of challans as proof of payment of Rs. 5,000/- for SGST and Rs. 5,000/- for CGST towards the fee for Advance Ruling. The Applicant has declared that the questions raised in the application have neither been decided by nor are pending before any authority under any provisions of the GST Act.

The Applicant's application was therefore admitted.

However later it being found that DGGI (Directorate General of GST Intelligence), Hyderabad Zonal Division had initiated an enquiry into the business activities of the  aforesaid applicant and issued a notice to them on 15-12-2021, their case falls under the first proviso to Sec 98(2) of the CGST Act, 2017 wherein their application is liable to be rejected as the question raised by them in the application is pending or decided in such proceedings before the DGGI (Directorate General of GST Intelligence).

Applicant was already subjected to "Inspection, Search & Seizure”.

Decided that, by way of amendment to Section 83(1) the expression ‘proceedings’ will have the same meaning for Chapter XIV as the other chapters mentioned in the CGST Act, 2017.

Finally, the Applicant's application was rejected considering that even if the application before AAR (Authority for Advance Ruling) was filed earlier to the investigation initiated by DGGI (Directorate General of GST Intelligence),the applicant cannot save himself from an inquiry on this ground only. He acquires no immunity/protection. Proceedings are already pending under Chapter XIV of GST Act, 2017. The Chapter of 

The law makes a comprehensive provision for advance rulings to ensure that disputes are minimal. Timelines are also given within which the ruling is to be given by the concerned authority. The aim is to provide certainty to the tax payer with respect to his obligations under the GST Act and an expeditious ruling, so that the relationship between the tax payer and administration is smooth and transparent and helps to avoid unnecessary litigation.

In the present matter, M/s. Srico Projects Private Limited, Hyderabad, Telangana (Applicant) filed an application for advance ruling. The Applicant is in works contract executing civil works for Central Government Employees Welfare Housing Organization (CGEWHO). Applicant wanted this tax ruling for knowing the rate of tax on works executed for the government. Whether "CGEWHO" is covered under the definition of the term "Government Entity". Further the doubt sought to be cleared related to the tax rate of 12% (CGST: 6% and SGST: 6%).

Broadly the provisions of the CGST Act and TGST (Telangana GST Act) Act are the same except for certain provisions. Under GST, Advance ruling can be obtained for a proposed transaction as well as a transaction already undertaken by the appellant.

Before we try to understand the "Advance Ruling" particularly with reference to the facts of this case, let us understand the general purpose of "Advance Ruling".

Broad objectives of Advance Ruling:

Provide certainty in tax liability in advance in relation to an activity proposed to be undertaken by the applicant;

Attract Foreign Direct Investment (FDI);

Reduce litigation;

Pronounce ruling expeditiously in a transparent and inexpensive manner.

The Applicant enclosed copies of challans as proof of payment of Rs. 5,000/- for SGST and Rs. 5,000/- for CGST towards the fee for Advance Ruling. The Applicant has declared that the questions raised in the application have neither been decided by nor are pending before any authority under any provisions of the GST Act.

The Applicant's application was therefore admitted.

However later it being found that DGGI (Directorate General of GST Intelligence), Hyderabad Zonal Division had initiated an enquiry into the business activities of the  aforesaid applicant and issued a notice to them on 15-12-2021, their case falls under the first proviso to Sec 98(2) of the CGST Act, 2017 wherein their application is liable to be rejected as the question raised by them in the application is pending or decided in such proceedings before the DGGI (Directorate General of GST Intelligence).

Applicant was already subjected to "Inspection, Search & Seizure”.

Decided that, by way of amendment to Section 83(1) the expression ‘proceedings’ will have the same meaning for Chapter XIV as the other chapters mentioned in the CGST Act, 2017.

Finally, the Applicant's application was rejected considering that even if the application before AAR (Authority for Advance Ruling) was filed earlier to the investigation initiated by DGGI (Directorate General of GST Intelligence),the applicant cannot save himself from an inquiry on this ground only. He acquires no immunity/protection. Proceedings are already pending under Chapter XIV of GST Act, 2017. It speaks of inspection, search, seizure and arrest provisions. 

Thus the above note helps us to understand that the Advance Ruling Mechanism cannot be used as a tool to save oneself from any investigation or subsequent inspection, search or seizure.

Full Text:

2022 (6) TMI 249 - AUTHORITY FOR ADVANCE RULING, TELANGANA