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The union government plans to establish a centralised Authority for Advance Rulings (AAR) for the Goods and Services Tax (GST). This is in view of the different rulings on identical cases pertaining to GST, thereby leading to confusion about applicability and the tax rate. To quote a recent case as an example, AARs in Karnataka and Maharastra had handed different rulings in a case of solar projects in the two states.
A top government official said that the government is looking at a central authority that would look into such matters. This authority would have officials from the states and the centre as its members. If people in different jurisdictions file an appeal on the same case, this body could hear the case.
The AAR is a quasi-judicial body. It allows assesses to get guidance in advance on their potential tax liabilities relating to any transaction. The AAR rulings are case-specific. However, they can be definitely applicable on tax assessment in cases of other businesses under similar circumstances.
The government is thinking of setting up this body for this reason. Before this, an indirect tax regime, as a centralised authority, ensured orders were consistent.
In a recent case, Maharashtra AAR adjudicated that solar project contracts are “works contracts” — a deemed supply of service and should be taxed at 18%, instead of a “composite supply” taxable at just 5%. On the other hand, Karnataka AAR confirmed in a case that engineering and procurement contracts are composite contracts and should be taxed at a concessional rate of 5%. Such variation in rulings can lead to further confusion. The union government is cautious about variations in such rulings.
Once the government decides to set up the proposed centralised AAR authority, it will decide its structure. This implies GST laws may have to be changed and all the states would need to come on board.[/vc_column_text][/vc_column][/vc_row]
