JUNE 06, 2018

By Disha J Bhandari, Advocate

CHAPTER XVII of the CGST Act, 2017 covers the provision of advance ruling. It provides that an applicant desirous of obtaining an advance ruling can make the application before the Authority of Advance Ruling on certain questions specified under Section 97(2) of the CGST Act. Applicant has been defined under the said Act as any person registered or desirous of obtaining registration.

Compensation cess is governed by the Goods and Service Tax (Compensation to States) Act, 2017 [hereinafter referred to as Compensation Cess Act]. According to Section 8 of the said Act, compensation cess is levied and collected in tune with Section 9 of the CGST Act and Section 5 of the IGST Act, as may be applicable. It is pertinent to mention that Section 11 of the Compensation Cess Act borrows certain provisions from CGST and IGST Acts. The said section reads as follows:

11. (1) The provisions of the Central Goods and Services Tax Act, and the rules made thereunder, including those relating to assessment, input tax credit, non-levy, short-levy, interest, appeals, offences and penalties , shall, as far as may be, mutatis mutandis, apply, in relation to the levy and collection of the cess leviable under section 8on the intra-State supply of goods and services, as they apply in relation to the levy and collection of central tax on such intra-State supplies under the said Act or the rules made thereunder.

(2) The provisions of the Integrated Goods and Services Tax Act, and the rules made thereunder, including those relating to assessment, input tax credit, non-levy, short-levy, interest, appeals, offences and penalties, shall, mutatis mutandis, apply in relation to the levy and collection of the cess leviable under section 8 on the inter-State supply of goods and services, as they apply in relation to the levy and collection of integrated tax on such inter-State supplies under the said Act or the rules made thereunder.

On reading the aforementioned section, one view which can be adopted is that all the provisions of CGST Act will be applicable to compensation cess with specific reference of assessment, input tax credit, non-levy etc. However, another interpretation which needs consideration is that all provisions of CGST Act only in relation to levy and collection of the cess have been borrowed by the Compensation Cess Act. Thus, if a provision of CGST/IGST Act which is not related to levy and collection, it will not be applicable to the Compensation Cess Act.

In support of the second interpretation, reference is made to Section 20 of the IGST Act which provides that the provisions relating to inter-alia advance ruling, shall apply in relation to integrated tax as they apply in relation to central tax.

Thus, what is pertinent to note is that the wordings used in Section 20 of IGST Act as well as Section 11 of the Compensation Cess Act are different. Can this mean that Compensation Cess Act has borrowed limited provisions and accordingly, the moot question remains whether an advance ruling can be filed for determining the applicability of compensation cess.

Further, while taking an approach regarding determining the scope of Section 11 of the Compensation Cess Act, another question which needs to be looked into is how far the principle of specific inclusion of substantial provision in a statute [as settled by SC in cases such Pioneer Silk Mills vs. UOI [Civil Appeals 1851-57 of 1994 with CA 517 of 1998 dismissed on 10.04.2002, - 2003-TIOL-45-HC-DEL-CX, JK Synthetics Limited vs. Commercial Tax officer - 2002-TIOL-736-SC-CT-CB, Collector vs. Orient Fabrics - 2003-TIOL-32-SC-CX will be applicable while interpreting the said Section 11 of the Compensation Cess Act.

Thus, the question which needs to be answered and settled is whether the Government while drafting Section 11 purposefully restricted its scope leading to no right of approaching advance ruling authority for compensation cess issue or it is merely a matter of interpretation and Section 11 borrows all the provisions of CGST Act including advance ruling.

(The author is Principal Associate with Lakshmikumaran & Sridharan, New Delhi and the views expressed are strictly personal.)

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