New Delhi: All private and public sector
companies can now approach the Authority for Advance Rulings (AAR) for
matters related to payment of customs duty. In an attempt to reduce
litigation and bring certainty in determining tax liabilities, the
government has given nod to public limited companies to use the platform
to get clarification on tax matters.
Currently, non-residents, whether individual, company, firm or
association of persons, can seek advance rulings on tax liability.
Besides, a resident who has undertaken or proposes to undertake a deal
with a non-resident could also approach AAR.
The Central Board of Excise and Customs (CBEC) in its board
meeting on September 9, has given an in-principle approval to specify
“resident public limited companies” in the eligible class of persons who
can seek an advance ruling in customs matters, an official in the
finance ministry said.
AAR is a body under the finance ministry which provides
information on request of the tax liability of an entity well in advance
for proper tax planning. The idea is to avoid long drawn and expensive
litigation.
“There would not be any threshold for applying to AAR,” the
official added. Earlier, the finance secretary had suggested the need
for a monetary threshold for approaching the authority. This, however,
was rejected by the CBEC on the grounds that restrictions such as
quantum of import or turnover of excisable goods and services in
previous year may not be harmonious to the advance ruling
According to Ernst & Young tax partner Bipin Sapra, the move
to include public limited companies is a positive step. “It would reduce
litigation and save cost of the company. There are many queries in
imports and approaching AAR would answer that,” he said.
The response from the trade and industry has not been good for
seeking advance rulings. The authority has received only 146
applications since its inception in May 2002 till March 31, this year.
“This is despite the fact that the scope of advance ruling has been
expanded by the government from time to time, both, at the point of
expanding the ambit of issues that could be decided by AAR as well as
the scope of applicant who could seek advance ruling,” the official
said.
The Standing Committee on Finance in 2008 had recommended that
there was a need to extend the ambit of AAR to enable resident assessee
to file an application before the authority. At the same time, the
committee accepted the contention of the revenue department that if all
residents are brought under the purview of the scheme, the system may
get choked.
The huge litigation between the revenue department and taxpayers
has been a concern for the government. Finance minister Pranab Mukherjee
in the annual conference of chief commissioners and directors general
of CBEC, had asked the officials to devise strategies for realisation
and liquidation of at least 50% of this locked-up revenue during the
current fiscal.
The number of appeal cases at various levels has increased to
87,862 at the end of this fiscal from 49,015 at the end of March 2007.
The amount locked up in these appeals rose from R28,595 crore to R62,543
crore during the period.
Source : www.financialexpress.com