CGST Section 98 — Procedure on receipt of application

Act Section 98 outlines the step-by-step procedure the Authority for Advance Ruling (AAR) must follow upon receiving an application seeking an advance ruling under the Goods and Services Tax (GST) regime. This section essentially ensures a structured process from application receipt to the pronouncement of the ruling, guaranteeing fairness and transparency.

Section 98 applies to any person registered under GST, or required to be registered, who intends to seek an advance ruling on questions related to the supply of goods or services they are undertaking or propose to undertake. This section governs the actions the AAR must take once such an application is received. It's activated when a business seeks clarity on a specific GST-related matter before undertaking a transaction, aiming to avoid potential disputes with tax authorities later.

Here’s a breakdown of the key steps and conditions outlined in Section 98:

• Acknowledgement and Record Gathering: Upon receiving an application, the AAR must immediately send a copy of the application to the concerned GST officer (typically the assessing officer). The AAR also has the power to request relevant records from the officer to properly evaluate the matter. These records must be returned to the officer as soon as possible.

• Preliminary Examination and Hearing: The AAR will scrutinize the application and the records obtained. Afterwards, it will schedule a hearing, giving an opportunity to the applicant (or their authorized representative) and the concerned GST officer (or their representative) to present their arguments.

• Admission or Rejection of Application: After the examination and hearing, the AAR will issue an order either admitting or rejecting the application. However, there are crucial limitations:

  • The AAR cannot admit an application if the question raised is already pending or has been decided in any other proceedings related to the applicant under the GST Act. For example, if a similar question is being litigated in an assessment or appeal, the AAR must reject the advance ruling application.

  • The AAR cannot reject an application without providing the applicant with an opportunity to be heard.

  • If the AAR rejects the application, the order must clearly state the reasons for the rejection.

• Communication of the Order: A copy of the admission or rejection order must be sent to both the applicant and the concerned GST officer.

• Pronouncement of Ruling (if Admitted): If the application is admitted, the AAR will examine any further materials presented by the applicant or obtained by the AAR itself. After giving another opportunity of being heard to both parties, the AAR will pronounce its advance ruling on the specific question raised in the application.

• Divergent Opinions: If the members of the AAR disagree on the question, they must state the points of disagreement and refer the matter to the Appellate Authority for Advance Ruling (AAAR) for a final decision.

• Time Limit: The AAR is mandated to pronounce its advance ruling in writing within 90 days from the date of receiving the application. This timeline aims to ensure a swift resolution of the applicant’s query.

• Communication of Ruling: A copy of the advance ruling, signed by the members and duly certified, must be sent to the applicant, the concerned GST officer, and the jurisdictional officer (the officer with jurisdiction over the applicant).

Practical Example:

Let's say a manufacturing company, "Bharat Industries," is planning to supply goods to a Special Economic Zone (SEZ). They are unsure whether this supply will be considered an export under GST and therefore be zero-rated. To gain clarity before making the supply, Bharat Industries applies to the AAR.

Under Section 98, the AAR would: (1) Forward the application to the concerned GST officer; (2) Request any relevant records; (3) Schedule a hearing with Bharat Industries and the GST officer; (4) Examine the application and all presented arguments; and (5) Issue an order admitting or rejecting the application. If admitted, it would then pronounce its ruling on whether the supply to the SEZ qualifies as an export for GST purposes within 90 days.

Important Considerations: While Section 98 provides a clear framework, it's essential to remember that amendments to the CGST Act, rules, and notifications issued by the government can impact the interpretation and application of this section. Businesses should consult with tax professionals to stay updated on the latest developments in GST law and ensure compliance.