The income tax AAR was restructured by the Finance Act 2021 — replacing the original Authority for Advance Rulings with the Board for Advance Rulings (BAR), which operates in two benches. The restructured BAR hears applications from non-residents (in respect of transactions involving non-residents), residents seeking an advance ruling on their tax liability, and applicants seeking to resolve disputes before the assessment stage. The BAR's ruling is appealable to the High Court. GP has adapted its AAR practice to the restructured BAR framework and appears before both BAR benches.
For GST, advance rulings are available from the Authority for Advance Rulings constituted in each state — and an appeal against a state AAR ruling lies to the Appellate Authority for Advance Rulings (AAAR). GST advance rulings cover classification of goods and services, applicability of exemption notifications, availability of ITC, time and value of supply, and whether a proposed activity constitutes a taxable supply. For businesses with operations in multiple states, the risk of conflicting advance rulings from different state authorities on the same question is significant — GP advises on the AAR strategy across multiple jurisdictions.
Non-resident investors — foreign companies, FPIs, NRIs, and overseas entities — entering transactions in India face significant income tax uncertainty: whether the income is taxable in India, which treaty provisions apply, whether there is a permanent establishment, and what withholding tax rate applies. GP prepares and argues BAR applications for non-residents on these questions — structuring the application to present the transaction clearly, to identify the legal issues squarely, and to make the strongest possible case for the ruling sought. Where the Department's preliminary view is adverse, GP responds to the Department's submissions before the BAR and, if necessary, challenges an adverse ruling in the High Court.
Resident taxpayers may apply to the BAR where the question of law is novel, involves the interpretation of an agreement, or involves a transaction with a non-resident. This includes questions about the tax treatment of complex M&A structures, the deductibility of specific transaction costs, the characterisation of cross-border payments, and the application of GAAR to a proposed transaction. GP advises resident taxpayers on whether the BAR route is available and appropriate — and where it is, structures the application to present the question with the precision and completeness that produces a clear and favourable ruling.
GST advance rulings from the state Authority for Advance Rulings provide certainty on the GST classification of supplies, the availability of ITC, the applicable rate, and whether a proposed activity constitutes a taxable supply. GP prepares GST AAR applications on classification questions (where the supply falls between two possible HSN/SAC headings with different rates), ITC eligibility questions (particularly for mixed and composite supplies), the applicability of exemption notifications, and the place of supply for complex multi-state arrangements. Where the state AAR gives an adverse ruling, GP files an appeal before the Appellate Authority for Advance Rulings (AAAR).
The withholding tax (TDS) obligations on payments made to non-residents are among the most commonly disputed areas of Indian income tax — the rate, the treaty benefit, the characterisation of the payment (royalty, FTS, business income, capital gain), and the existence of a permanent establishment all affect the TDS obligation. For Indian companies making regular payments to foreign affiliates or service providers, a BAR ruling on the correct withholding rate provides certainty and eliminates the risk of interest and penalty for under-deduction. GP obtains BAR rulings on TDS obligations for Indian payers making cross-border royalty, FTS, and dividend payments, and for non-residents receiving such payments who want certainty on their Indian tax liability.
An adverse ruling from the BAR (income tax) is appealable to the High Court. An adverse ruling from the state GST AAR is appealable to the AAAR; an adverse AAAR ruling may be challenged in the High Court by writ petition. GP challenges adverse BAR and AAR rulings in the High Court — establishing that the ruling erred in its interpretation of the statutory provisions, misapplied the treaty, failed to consider relevant binding precedents, or violated the principles of natural justice in the conduct of the proceedings. The challenge to an adverse advance ruling is urgent — the ruling will be applied by the Department to the transaction until it is stayed or set aside.
Importers and exporters who regularly deal in goods whose customs classification or valuation is uncertain may apply for an advance ruling from the Customs Authority for Advance Rulings — constituted under Sections 28H to 28N of the Customs Act 1962. A customs advance ruling is binding on the customs officer at the port of entry for the specific goods and the specific importer — eliminating the classification and valuation disputes that arise on repeated imports of the same goods. GP prepares customs advance ruling applications for importers whose goods fall between two tariff headings, whose related-party transaction value is subject to customs challenge, or who need certainty on the duty rate before committing to a significant import programme.
The most frequently sought advance ruling from the income tax BAR is on treaty benefits — whether a non-resident is entitled to the reduced rate of tax or the exemption provided by a Double Taxation Avoidance Agreement (DTAA) for a specific type of income. The questions most commonly brought to the BAR are: whether a capital gain on the sale of Indian company shares is taxable in India under the applicable treaty (particularly relevant post the Mauritius and Singapore treaty amendments of 2016); whether a service fee payment constitutes FTS (fees for technical services) attracting Indian withholding tax; and whether the recipient of a royalty payment has a permanent establishment in India that makes the royalty income taxable as business profits rather than as royalty. Each of these questions has a significant financial impact and a genuinely uncertain answer — making the advance ruling the appropriate route.
The General Anti-Avoidance Rules (GAAR) in Chapter X-A of the Income Tax Act give the tax authorities the power to disregard or recharacterise an arrangement that is an "impermissible avoidance arrangement" — one whose main purpose is to obtain a tax benefit and which lacks commercial substance. For transactions that could potentially attract GAAR — holding company structures, intra-group financing arrangements, restructurings with significant tax benefits — the advance ruling route offers the possibility of obtaining the BAR's view on whether GAAR applies before the transaction is entered into. GP advises on whether a proposed transaction has GAAR exposure and, where appropriate, structures the BAR application to seek clarity on the GAAR question alongside the substantive tax question.
Where a non-resident sells immovable property in India, the buyer is required to withhold tax (TDS) at 20% on the entire sale consideration — regardless of the actual capital gain. Where the non-resident has held the property for a long period, the actual gain may be much lower than 20% of the sale consideration. In these circumstances, the non-resident seller may apply to the BAR for an advance ruling on the correct tax liability — and simultaneously apply to the Assessing Officer under Section 195(2) for a lower or nil withholding certificate. GP advises non-resident property sellers on both routes — including the advance ruling application before the BAR and the Section 195(2) certificate application — to ensure that the TDS obligation reflects the actual tax liability rather than a notional percentage of gross consideration.
A BAR or AAR ruling is only as good as the application that produced it. An application that describes the transaction incompletely, frames the legal question imprecisely, or fails to address the obvious counterarguments will produce a ruling that is either adverse, narrowly framed, or conditional on facts that do not match the actual transaction. GP prepares AAR applications with the same rigour as court pleadings — the transaction facts stated completely and accurately, the legal question framed with precision, the relevant precedents cited and distinguished, and the counterarguments anticipated and addressed. An application of this quality is far more likely to produce the ruling sought.
The majority of income tax BAR applications involve international tax questions — treaty interpretation, permanent establishment risk, the characterisation of cross-border payments, and the application of GAAR to cross-border structures. GP's international tax practice — which advises on treaty planning, transfer pricing, and cross-border structuring — brings the depth of treaty expertise that BAR proceedings require. The advance ruling application is an extension of the international tax advisory work, not a separate proceeding; and GP's advisory team and BAR team are the same team.
Not every tax uncertainty warrants an advance ruling application. The application takes time, creates a public record, and may produce an adverse ruling that makes things worse than taking the risk and defending an assessment. GP advises on the decision — whether to seek an advance ruling, take the position on the return and defend it at assessment if challenged, or restructure the transaction to remove the uncertainty. This advisory judgment — which requires a deep understanding of the tax position, the BAR's track record on similar questions, and the likelihood of audit — is the most valuable service GP provides in the advance ruling context.
Acted for a Singapore-headquartered technology company that was receiving annual service fees from its Indian subsidiary — on which the Indian company was deducting TDS at 10% as fees for technical services under Section 195 of the Income Tax Act. The Singapore company had no PE in India and was entitled to the benefit of the India-Singapore DTAA. GP filed a BAR application on behalf of the Singapore company — establishing that the services were not "technical services" within the DTAA definition (which requires the services to make available technical knowledge, experience, skill, or know-how), that the fees were therefore business income under Article 7, and that as the Singapore company had no PE in India the income was not taxable in India. The BAR accepted the argument and ruled that the payments were not FTS and were not taxable in India — eliminating the TDS obligation entirely.
Obtained an advance ruling from the Maharashtra GST Authority for Advance Rulings for an IT services company whose bundled supply of software licences and implementation services was being treated by the Department as a mixed supply taxable at the highest rate of 18%. GP prepared the AAR application with a detailed analysis of the supply — demonstrating that the implementation service was the dominant element, that the software was integral to and inseparable from the implementation service, and that the supply was therefore a composite supply taxable at the rate applicable to the principal supply (implementation service at 12%). The Maharashtra AAR accepted GP's analysis and ruled that the supply was composite — confirming the 12% rate and eliminating the 6% additional tax exposure across the company's entire annual billing.
Challenged an adverse BAR ruling on behalf of an NRI of US nationality selling a Mumbai residential property. The BAR had ruled that the capital gain was taxable in India at 20% under Section 112 of the Income Tax Act, declining to apply the India-USA DTAA exemption on the basis that the property had been acquired using funds repatriated from India and was therefore "Indian-sourced". GP filed a writ petition in the Bombay High Court challenging the BAR ruling — arguing that the treaty exemption for capital gains on immovable property does not contain a "source of funds" condition, that the BAR had imposed a condition that does not exist in the treaty, and that the ruling was contrary to settled treaty interpretation principles. The Bombay High Court stayed the BAR ruling immediately, admitted the petition, and subsequently held that the BAR's "source of funds" restriction had no basis in the treaty — remanding the matter to the BAR for a fresh ruling consistent with the correct treaty interpretation.
The advance ruling team appears before the Board for Advance Rulings in New Delhi, the state-level GST Authorities for Advance Rulings (primarily Maharashtra and Karnataka), the Appellate Authority for Advance Rulings, and the Bombay and Delhi High Courts in challenges to adverse rulings.
For NRI clients — particularly those in the UAE, UK, USA, Australia, and Singapore corridors — the advance ruling on the Indian tax consequences of selling Indian property or receiving Indian income is frequently the first engagement with GP's tax practice, and the starting point of a broader tax planning relationship.
The complete guide to the income tax advance ruling process under the restructured BAR framework — the eligibility criteria, the application process, the binding effect, and the situations where a ruling application provides more certainty than any other option.
Read Insight →Why TDS at 20% of the sale price is frequently much more than the actual tax liability, how to obtain a lower withholding certificate, and when the BAR advance ruling is the right tool for certainty on the Indian capital gains tax consequences.
Read Insight →Whether you are a non-resident investor seeking certainty on Indian tax liability, a business with a complex GST classification question, or an NRI selling property in India — GP advises on whether an advance ruling is the right tool and, if it is, obtains it.