India is planning a significant shift toward a litigation-free environment under the GST regime, creating a liberal mechanism that would allow all taxpayers to ascertain liabilities beforehand.
The draft rules for advance ruling mechanism will allow all categories of taxpayers to approach the authority, unlike the existing system that restricts the facility to proposed transactions before the start of a business.
The advance ruling infrastructure will also ensure that every commissionerate has an authority, with a joint commissioner level officer as a member. The efforts seem to be to reduce post-assessment disputes and also to bring certainty in taxation of supplies by a person.
At present, advance ruling can be sought for customs, excise duty and service tax for any proposed transaction. It cannot be sought for any existing transaction for central taxes, although the state value added tax regime permits even existing transactions.
So this move is the first step toward bringing down litigation, but bias should not be toward revenue generation. Some experiments in the direct taxes, with the dispute resolution panel having revenue authorities as members, have not been very successful due to the inherent revenue bias.