Application for refund by unregistered persons under GST

Notification No. 26/2022-Central Tax through point no. 12 amended the rule 89 and insert following clauses which provide provisions regarding application for GST refund by unregistered person:

12. (i) after clause (k), the following clauses shall be inserted, namely:-

“(ka) a statement containing the details of invoices viz. number, date, value, tax paid and details of payment, in respect of which refund is being claimed along with copy of such invoices, proof of making such payment to the supplier, the copy of agreement or registered agreement or contract, as applicable, entered with the supplier for supply of service, the letter issued by the supplier for cancellation or termination of agreement or contract for supply of service, details of payment received from the supplier against cancellation or termination of such agreement along with proof thereof, in a case where the refund is claimed by an unregistered person where the agreement or contract for supply of service has been cancelled or terminated;

(kb) a certificate issued by the supplier to the effect that he has paid tax in respect of the invoices on which refund is being claimed by the applicant; that he has not adjusted the tax amount involved in these invoices against his tax liability by issuing credit note; and also, that he has not claimed and will not claim refund of the amount of tax involved in respect of these invoices, in a case where the refund is claimed by an unregistered person where the agreement or contract for supply of service has been cancelled or terminated;”;

(ii) in clause (m), after the proviso, the following proviso shall be inserted, namely:-

“Provided further that a certificate is not required to be furnished in cases where refund is claimed by an unregistered person who has borne the incidence of tax.”.

1. According to above rule, the unregistered person shall be required to furnish the detail of invoice no., date, value, tax paid and detail of payments made to the supplier in statement-8 along with copy of Invoice, proof of payment made to the supplier, copy of agreement/contract entered with supplier and termination proof thereof.

2. A certificate issued by supplier shall include the following:

• that he has paid tax in respect of the invoices on which refund is being claimed by the applicant;
• that he has not adjusted the tax amount involved in these invoices against his tax liability by issuing credit note; and
• that he has not claimed and will not claim refund of the amount of tax involved in respect of these invoices in a case where the refund is claimed by an unregistered person where the agreement or contract for supply of service has been cancelled or terminated.

3. Issue with unregistered person for claiming refund

The unregistered person means a person not registered under GST Act due to not liable for registration u/s 22 or compulsory registration u/s 24 of the CGST Act, 2017.If not registered question of refund not arises, but in certain cases unregistered person may get the refund of tax paid by him.

4. Cases where refund can be claimed by unregistered person.

• The unregistered person entered into an agreement/ contract with a builder for supply of services of construction of flats/ building, etc. and paid the amount towards consideration for such service, either fully or partially, along with applicable tax, 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 notes 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.
• 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 CGST Act may have already expired and therefore, the insurance companies may refund only the proportionate premium net off GST.

5. Circular No. 188 provides the manner for filing application for refund by unregistered person:

• Temporary Registration: The unregistered person shall obtain a temporary registration on the common portal using his Permanent Account Number (PAN). While doing so, the unregistered person shall select the same state/UT where his/her supplier, in respect of whose invoice refund is to be claimed, is registered.
• Aadhar Authentication and Bank Detail: The unregistered person would be required to undergo Aadhaar authentication and the unregistered person would be required to enter his bank account details to obtain the refund amount.
• Application form and Category for refund: The application for refund shall be filed in FORM GST RFD-01 on the common portal under the category ‘Refund for unregistered person’.
• Format and documents: 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. (Refer point no. 1).
• Maximum refund: The refund amount claimed shall not exceed the total amount of tax declared on the invoices in respect of which refund is being claimed.
• Certificate from supplier: The applicant shall 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. (Refer point no. 2)
• Separate applications for different suppliers: Separate applications for refund have to be filed in respect of invoices issued by different suppliers.
• Registration in different states/UTs: where the 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 concerned States/UTs where the said supplier are registered.
• Cases where application allowed: Refund application can be filed by unregistered persons only in 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.
• Relevant date for time period of two years u/s 54 for refund: 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) have entered into a long-term contract/ agreement for the supply, with the provision of making payment in advance or in instalments, 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 section 54 of the CGST Act, date of issuance of letter of cancellation of the contract/ agreement for supply by the supplier will be considered as the date of receipt of the services by the applicant.
• Minimum refund value: No refund shall be claimed if the amount is less than one thousand rupees.
• Proportionate amount of refund: In cases where the amount paid back by the supplier, the proportionate amount of tax involved in such amount paid back shall be refunded to the unregistered person.