GST likely to get centralised AAR for uniform rulings
India is looking at creating a centralised Authority for Advance Rulings (AAR) for the goods and services tax (GST) after divergent rulings on identical issues fuelled confusion over applicability and the rate of tax. A recent case in point being the divergent rulings by Karnataka and Maharashtra AARs on the issue of solar projects.
“We are looking at an issuebased central authority with officials from states and the Centre,” a top government official told ET. “If more than one appeal is filed on the same issue in different jurisdictions it can be taken up by this body.”
The AAR is a quasi-judicial body that allows assessees to get guidance on their potential tax liabilities relating to any transaction beforehand. The rulings by the AAR are case-specific, but they have a persuasive impact on tax assessment in cases of other firms under similar circumstances.
This is the key reason behind the government contemplating such a move. “AAR decisions are specific to the case, but they do have some precedence value,” the official said. The previous indirect tax regime had a centralised body ensuring consistency in orders.
Government Wary of Variations
Maharashtra AAR ruled in a recent case that solar project contracts are “works contracts”, taxable at 18% as a deemed supply of service, instead of a “composite supply” that would have attracted 5%.
Karnataka AAR, on the other hand, reaffirmed in a case that engineering and procurement contracts are composite contracts and taxable at a concessional rate of 5%.