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Advance Ruling In Service Tax India

A new Chapter V-A has been inserted by the Finance Act, 2003 in the Finance Act, 1994 to provide for advance rulings with respect to service tax. Advance ruling means the determination, by the authority of a question of law or fact specified in the application, regarding the liability to pay service tax, in relation to a service, proposed to be provided, by the applicant, who may be any of the following:

• a non resident setting up a joint venture in India in collaboration with a non resident or a resident.
• a resident setting up a joint venture in India in collaboration with a non resident.
• a wholly owned subsidiary Indian company, of which the holding company is a foreign company.

The same has been clarified in Re McDonald’s India Pvt. Ltd. [(2004) 165 ELT 404 (AAR)], where it has been held that advance ruling can not be availed by ongoing business/undertaking which has already commenced business.

The question on which advance ruling may be sought shall be in respect of :

• classification of any service as a taxable service.
• the valuation of taxable services.
• the principles to be adopted for the purposes of determination of value of the taxable service.
• applicability of notifications.
• admissibility of credit of service tax.

Section 96C prescribes the application in Form AAR (ST) required to be made to the authority in prescribed form and manner. The application should be made in quadruplicate and accompanied by a fee of rupees two thousand and five hundred only. The application can be withdrawn within a period of 30 days from the date of the application. The authority is required to give its ruling within 90 days of the receipt of valid application.

An application may be rejected by the prescribed authority if the question or subject matter of ruling sought in the application is such which is already pending before any assessing officer, Tribunal and court of law or such questions already stands decided by any court or bench of Tribunal.

The advance ruling pronounced on a matter referred to the authority is binding only on the applicant and his jurisdictional assessing officers and only in respect of question referred to by the applicant. However, if there is a change in the law or facts on the basis of which ruling was pronounced, such advance ruling will not be binding.