MM TAX CLUB

Instances  have  been  brought  to  the  notice  where  the  unregistered  buyers,  who  had entered  into  an  agreement/  contract  with  a  builder  for  supply  of  services  of  construction  of flats/ building, etc. and had paid the amount towards consideration for such service, either fully or  partially,  along  with  applicable  tax,  had  to  get  the  said  contract/  agreement  cancelled subsequently  due  to  non-completion  or  delay  in  construction  activity  in  time  or  any  other reasons. In a number of such cases, the period for issuance of credit note on account of such cancellation of service under the provisions of section 34 of the Central Goods and Service Tax Act, 2017 (hereinafter referred to as ‘CGST Act’) may already have got expired by that time. In such cases, the supplier may refund the amount to the buyer, after deducting the amount of tax collected by him from the buyer. 1.2Similar situation may arise in cases of long-term insurance policies where premium for the entire period of term of policy is paid upfront along with applicable GST and the policy is subsequently required to be terminated prematurely due to some reasons. In some cases, the time period for issuing credit note under the provisions of section 34 of the CGSTActmay have already expired and therefore, the insurance companies may refund only the proportionate premium net off GST.1.3 Representations  have  been  received  requesting  for  providing  a  facility  to  such unregistered buyers/ recipients for claiming refund of amount of tax borne by them in the event of cancellation of the contract/agreement for supply of servicesof construction of flat/ building or on termination of long-term insurance policy. 2.It  would  be  pertinent  to  mention  that  sub-section  (1)  of  section  54  of  the  CGST  Act already provides that any person can claim refund of any tax and interest, if any, paid on such

Page 2of 4tax or any other amount paid by him, by making an application before the expiry of two years from  the  relevant  date  in  such  form  and  manneras  may  be  prescribed.  Further, in  terms  of clause (e) of sub-section (8) of section 54 of the CGST Act, in cases where the unregistered person has borne the incidence of taxand not passed on the same to any other person, the said refund shall be paid to himinstead of being credited to Consumer Welfare Fund (CWF).2.1In  order  to  enable  such  unregistered  personto  file  application  for  refund  under  sub-section  (1)  of  section  54,  in  cases  where  the  contract/agreement  for  supply  of  services  of construction of flat/ building has been cancelled or where long-term insurance policy has been terminated,anew functionality has been made available on the common portal which allows unregistered persons to take a temporary registration and apply for refund under the category ‘Refund  for Unregistered  person’. Further, sub-rule  (2)  of  rule  89  of Central Goods  and Service TaxRules,  2017  (hereinafter  referredto as ‘CGST Rules’) hasbeen  amended and statement 8 has been inserted in FORM GST RFD-01 vide Notification No. 26/2022-Central Taxdated 26.12.2022to  provide  for  the  documents  required  to  be  furnished along with  the application of refund by the unregistered persons and the statement to be uploaded along with the said refund application.3.In order to ensure uniformity in the implementation of the above provisions of the law across field formations, the Board, in exercise of its powers conferred by section 168(1) of the CGST Act, hereby clarifies the following:4.Filing of refund application4.1The unregistered person, who wants to file an application for refund under sub-section (1) of section 54 of CGST Act, in cases where the contract/agreement for supply of services of construction of flat/ building has been cancelled or where long-term insurance policy has been terminated, shall obtain  a temporary  registrationon  the  common  portal  using hisPermanent Account Number (PAN). While doing so, the unregistered person shall select the same state/UT where  his/her  supplier,in  respect  ofwhose  invoice  refund  is  to  be  claimed, is  registered. Thereafter,  the  unregistered  person  would  be  required  to  undergo  Aadhaar  authentication  in terms of provisions of rule 10B of the CGST Rules. Further, the unregistered person would be required to enter his bank account details in which he seeks to obtain the refund of the amount claimed. The applicant shall provide the details of the bank account which is in his name and has been obtained on his PAN. 4.2The application for refund shall be filed in FORM GST RFD-01on the common portalunder the category ‘Refund forunregistered person’. The applicant shall upload statement 8(in pdf format) and all the requisite documents as per the provisions of sub-rule (2) of rule 89 of the CGST Rules.  The refund amount claimed shall not exceed the total amount of tax declared  on  the  invoicesin  respect  of  which  refund  is  being  claimed. Further,  the  applicant shall also upload the certificate issued by the supplier in terms of clause (kb) of sub-rule (2) of rule 89 of the CGST Rules along with the refund application. The applicant shall also upload any other document(s) to support his claim that he has paid and borne the incidence of tax and that the said amount is refundable to him.

Page 3of 44.3Separate  applications  for  refund have to  be  filed in  respect  of  invoices  issued  by different suppliers. Further, wherethe suppliers,in respect of whose invoices refund is to be claimed,are registered in different States/UTs, the applicant shall obtain temporary registration in the each of the concernedStates/UTswhere the said supplier areregistered.4.4Where the time period for issuance of credit note under section 34 of the CGST Act has not expired at the time of cancellation/termination of agreement/contract for supply of services, the  concerned  suppliers  can  issue  credit  note  to  the  unregistered  person.  In  such  cases, the supplier would be in a position to also pay back the amount of tax collected by him from the unregistered  person  and  therefore,there  will  be  no  need  for  filing  refund  claim  by  the unregistered  persons  in  these  cases.  Accordingly,  the  refund  claim  can  be  filed  by  the unregistered  persons  only  in  those  cases  where  at  the  time  of  cancellation/termination  of agreement/contract  for  supply  of  services,  the  time  period  for  issuance  of  credit  note  under section 34 of the CGST Act has already expired.5.Relevant date for filing of refund:As per sub-section (1) of section 54 of the CGST Act, time period of two years from the relevant  date  has  been  specified  for  filing  an  application  of  refund.Further,  the  relevant date in respect of cases of refund by a person other than supplier is the date of receipt of goods or services or both by such person in terms of provisions of clause (g) in Explanation (2) under section  54  of  the  CGST  Act.However,  in  respect  of  cases  where  the  supplier  and  the unregistered  person  (recipient)  haveentered  into  a  long-term  contract/  agreementfor  the supply,with  the  provision  of  making  payment  in  advance  or  in  instalments,  for  example-construction  of  flats  or  long-term  insurance  policies,  if  the  contract is cancelled/  terminatedbefore completion of service for any reason, there may be nodate of receipt of service, to the extent supplyhasnot beenmade/ rendered. Therefore, in such type of cases, it has been decided that for the purpose of determining relevant date in terms of clause (g) of Explanation (2) under section54  of  the  CGST  Act, date of  issuance  of letter  of cancellation of  the  contract/ agreement for supply by the supplier will beconsidered as the date of receipt of the services by the applicant.6.Minimum refund amountSub-section (14) of section 54of  

the CGST Actprovides that no refund under sub-section (5) or sub-section (6) shall be paid to an applicant, if amount is less than one thousand rupees. Therefore, no refund shall be claimed if the amount is less than one thousand rupees.7.The proper officer shall process the refund claim filed by the unregistered person in a manner similar to other RFD-01 claims. The proper officer shall scrutinize the application with respect  to  completeness  and  eligibility  of  the  refund  claim  to  his  satisfaction  and  issue  the refund sanction order in FORM GST RFD-06 accordingly. The proper officer shall also upload a detailed speaking order along with the refund sanction order in FORM GST RFD-06.

Page 4of 47.1In  cases  where  the  amount  paid  back  by  the  supplier  to  the  unregistered  person  on cancellation/termination of agreement/contract for supply of services is less than amount paid by such unregistered person to the supplier, only the proportionate amount of tax involved in such amount paid back shall be refunded to the unregistered person. 8.It is requested that suitable trade notices may be issued to publicize the contents of this Circular. 9.Difficulty, if any, in the implementation of this Circular may be brought to the notice of the Board. Hindi version will follow.

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