Section 96 of CGST Act, 2017 – Authority for Advance Ruling

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Section 96 of CGST Act, 2017 – Authority for Advance Ruling

Act: Central Goods and Services Tax Act, 2017
 Chapter: XVII – Advance Ruling
 Section Covered: Section 96
 Effective From: 01st July 2017

🔎 Introduction

Section 96 of the CGST Act, 2017 provides for the constitution of the Authority for Advance Ruling (AAR) under GST.

This section lays the foundation for the Advance Ruling mechanism by formally establishing the authority that is empowered to issue rulings on specified GST matters.

The objective is to provide clarity and certainty to taxpayers before or during transactions.

📜 Bare Provision – Section 96

Subject to the provisions of this Chapter, for the purposes of this Act, the Authority for Advance Ruling constituted under the provisions of a State Goods and Services Tax Act or Union Territory Goods and Services Tax Act shall be deemed to be the Authority for Advance Ruling in respect of that State or Union territory.

✅ Meaning in Simple Words

Section 96 states that:

👉 The Authority for Advance Ruling (AAR) is constituted under the respective State GST Act or UT GST Act.
👉 The same authority will act for the purposes of the CGST Act within that State or Union Territory.

In simple terms, there is one common Authority for Advance Ruling at the State/UT level, functioning for both CGST and SGST/UTGST.

📌 Key Features of Section 96

✔ Establishes the Authority for Advance Ruling (AAR)
✔ Authority is constituted under State/UT GST Act
✔ Functions for CGST purposes within that State/UT
✔ Provides decentralized mechanism for advance rulings

🏛 Composition of Authority

Though Section 96 refers to constitution under State law, generally the Authority consists of:

• One member from Central Tax
• One member from State Tax

This ensures balanced representation in decision-making.

🎯 Objective of Section 96

The main objectives are:

✔ To create a statutory body for advance rulings
✔ To ensure uniform interpretation within a State
✔ To reduce litigation
✔ To provide certainty in GST matters

📖 Scope of Authority

The Authority constituted under Section 96 can:

• Admit or reject applications under Section 97
• Hear applicants and jurisdictional officers
• Pronounce advance rulings
• Exercise powers granted under Section 105

However, its jurisdiction is limited to questions specified under Section 97(2).

⚖️ Judicial Principles Relating to AAR

1️⃣ Columbia Sportswear Company v. Director of Income Tax (SC)

The Supreme Court observed that Advance Ruling Authorities derive powers strictly from statute and must function within defined jurisdiction.

👉 Principle: AAR cannot travel beyond statutory boundaries.

2️⃣ High Court Observations in GST Matters

Courts have held that Advance Ruling Authorities must follow principles of natural justice while deciding applications.

👉 Opportunity of hearing is mandatory before rejection.

📊 Practical Illustration

A company based in Maharashtra wants clarity on GST rate applicable to a new product.

➡ It files application before Maharashtra Authority for Advance Ruling.
➡ The Authority constituted under State GST Act acts as AAR for CGST purposes also.
➡ The ruling applies within that State.

📌 Important Points to Remember

• Authority is State-specific
• Separate authorities exist for each State/UT
• Ruling is binding only within that jurisdiction
• Authority functions as quasi-judicial body
• It operates under statutory powers

🔄 Section 96 in Context of Chapter XVII

SectionSubject
Section 95Definitions
Section 96Constitution of Authority
Section 97Application for Advance Ruling
Section 98Procedure on receipt of application

Section 96 provides the institutional framework upon which the remaining advance ruling provisions operate.

❓ Frequently Asked Questions (FAQs) – Section 96 CGST

Q1. What does Section 96 provide?

It provides for constitution of Authority for Advance Ruling.

Q2. Is there a separate AAR for CGST and SGST?

No. The Authority constituted under State GST Act acts for CGST also.

Q3. Is AAR a judicial authority?

It is a quasi-judicial authority.

Q4. Can AAR decide any GST issue?

No. Only issues specified under Section 97(2).

Q5. Is AAR constituted at Central level?

No. It is constituted at State/UT level.

Q6. Does each State have its own AAR?

Yes.

Q7. Can AAR order be challenged?

Yes. Appeal lies before Appellate Authority under Section 100.

Q8. Is AAR decision binding nationwide?

No. It is binding only on the applicant and concerned officers within that State.

Q9. What is the purpose of decentralizing AAR?

To ensure quicker resolution and administrative efficiency.

Q10. Why is Section 96 important?

Because it establishes the statutory authority that administers the Advance Ruling system under GST.

📝 Conclusion

Section 96 of the CGST Act, 2017 establishes the Authority for Advance Ruling at the State or Union Territory level. This Authority serves as the primary forum for taxpayers seeking clarity on GST matters before undertaking transactions.

By creating a structured and decentralized advance ruling mechanism, Section 96 strengthens tax certainty, reduces litigation and promotes voluntary compliance under GST law.

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