New Delhi: The revenue department is mulling the idea of setting up a national bench of the Appellate Authority for Advance Ruling (AAAR) as the Authority for Advance Ruling (AAR) mechanism in its current form is not serving the purpose of providing certainty to the taxpayers under the Goods and Services Tax (GST) regime, according to a finance ministry source.
"There has been a view that a second AAAR needs to be set up soon. It would be a national bench only to reconcile divergent verdicts passed by state AARs. We will present the proposal before the GST Council, which is expected to meet in June," said the source.
The government move comes in the wake of taxpayers facing uncertainty and confusion over various tax dues, which are often presented with contradictory claims.
The appellate authority currently has two members-the Chief Commissioner of Central Tax as designated by the CBIC and the Commissioner of State Tax. The appellate authority has been mandated to pass the order within 90 days of filing an appeal.
However, the AARs in different states have passed about 470 orders while AAARs have disposed of around 69 cases till March 2019. Out of the orders passed by AARs, contradictory orders were passed in about 10 cases, a couple of which were later clarified by the Central Board of Indirect Taxes and Customs (CBIC).
The source said the GST law would have to be amended for setting up a second appellate authority since the Act in its present form does not provide for a centralised authority.
Setting up a national bench of AAAR would help bring certainty in the GST era as divergent rulings by AARs leave the industry flummoxed about the tax implication of a particular business decision.
"The composition of the national bench of AAAR would be decided after the states agree to the proposal," the source said.
The GST Council, chaired by Union Finance Minister and comprising state counterparts, was scheduled to discuss it in the July 2018 meeting, however, it did not arrive at a decision on this.
Under the GST law, each state is required to set up an AAR comprising one member from the central tax department, and another from the respective state. An aggrieved party can file an appeal against an order to the AAAR within 30 days, which may be further extended by a month.
Industry experts, however, feel that as both AAR and AAAR have only tax officers as members, the ruling is most cases is tilted towards the revenue side. Therefore, a quasi-judicial decision-making process of AAR is needed....