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CBIC has issued several circulars pursuant to the decisions taken at the 48th GST Council meeting. The gist of the same is as under:

Refund by unregistered persons

Situations may arise where the unregistered buyers, who had entered into an agreement/contract with a builder for the supply of construction services 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 many such cases, the period for issuance of the tax credit note may already have 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. A similar situation may arise in cases of long-term insurance policies where the premium for the entire term of the policy is paid upfront along with applicable GST and the policy is subsequently required to be terminated prematurely due to some reasons. In such situations, Sec. 54(1) of the CGST Act, 2017 duly permits any person (including an unregistered person) who has borne the incidence of tax to claim a refund of any tax and interest, if any, paid on such tax or any other amount paid by him, by making an application before the expiry of two years. Hence the unregistered buyers can make the claim for a refund of the tax paid and borne.

Circular No. 188/20/2022-GST dt. 27.12.2022 has been issued to provide the following procedure for filing the refund claims:

  • 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. Aadhaar authentication and furnishing the bank details shall be mandatory.
  • The application for refund shall be filed in FORM GST RFD-01 on the common portal under the category ‘Refund for unregistered person’. The applicant shall upload statement 8 (in pdf format) and all the requisite documents (viz. 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 a copy of such invoices, proof of making such payment to the supplier, the copy of the agreement or registered agreement or contract, as applicable, entered with the supplier, the letter issued by the supplier for cancellation or termination of agreement or contract, details of payment received from the supplier against cancellation or termination).
  • The claimant shall also upload 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 a refund of the amount of tax involved in respect of these invoices. In such a situation, a certificate from CA or CMA shall not be additionally required (amendment in Rule 89(2) vide Notification No. 26/2022 – CT dt. 26.12.2022).
  • Separate applications for refund have to be filed in respect of invoices issued by different suppliers. Further, 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 each of the concerned States/UTs where the said supplier is registered.
  • 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 the supply of services, the time period for issuance of credit note under section 34 of the CGST Act has already expired (i.e., 30th November of the subsequent financial year to the year in which the invoice has been issued or filing of annual return, whichever is earlier).
  • The relevant date for applying the limitation period of two years for filing the refund claim shall be the date of issuance of the letter of cancellation of the contract/agreement for supply by the supplier
  • The proper officer shall process the refund claim and issue detailed speaking order in FORM GST RFD-06.
  • In cases where the amount paid back by the supplier to the unregistered person on cancellation/termination of agreement/contract for the supply of services is less than the amount paid by the unregistered person to the supplier, only the proportionate amount of tax involved in the such amount paid back shall be refunded to the unregistered person.

The following issues may kindly be considered:

  • The Circular provides that the refund claim shall not be allowed where the time limit for issuance of the tax credit note by the supplier has not elapsed. In case of cancellation of supply, there cannot be a levy of tax. Further, Sec. 34(1) of the CGST Act, 2017 provides that the supplier ‘may’ issue the tax credit note. Therefore, in such a situation, the Circular ought to have permitted the refund claim even in cases where the time limit to issue the tax credit note has not elapsed if the unregistered person has borne the burden of the tax. This may be required when the supplier cannot adjust the tax based on the credit note.
  • The Circular provides that only a proportionate refund of the GST paid shall be granted in situations where the entire amount is not paid back by the supplier. Situations may arise where the supplier may retain certain amounts as damages on account of termination of the contract. Such damages are not liable to tax. Therefore, the Circular ought to have permitted a refund of the entire GST paid and borne by the unregistered person even if the partial amount is not paid back by the supplier on account of damages.

ITC availment in respect of transportation services for exports

By virtue of proviso to Sec. 12(8) of the IGST Act, 2017 (applicable from 01.02.2019), IGST stands leviable on the supply of transportation services in respect of the goods destined outside India where such services are provided by the supplier located in India to the recipient also located in India. It is possible that the supplier and recipient may be located in the same State and still IGST is charged on the invoice. Hence doubts were raised as to whether the ITC of the said IGST shall be admissible. Circular No. 184/16/2022-GST dt. 27.12.2022 has been issued clarifying that the ITC of the said IGST shall be duly admissible. The Circular further clarifies that the supplier of service shall report the place of supply of such service by selecting the State code as ‘96-Foreign Country’ from the list of codes in the drop-down menu available on the portal in FORM GSTR-1.

Limitation for issuance of SCN/Order

The law permits the issuance of a show-cause notice (SCN) as well as an adjudication order (‘order’) within stipulated time limits. As per Sec. 73 of the CGST Act, 2017 in cases not involving fraud or any willful-misstatement or suppression of facts, an order is required to be issued within three years from the due date for furnishing of annual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilised relates to or within three years from the date of erroneous refund. The SCN in such a situation is required to be issued at least three months prior to the time limit for issuance of the order (i.e., within a period of a period of 2 years and 9 months. This is considered a normal period of limitation. As per Sec. 74 of the CGST Act, 2017 in cases involving fraud or any willful misstatement or suppression of facts, the time limits for issuance of the order shall five years. The SCN in such a situation is required to be issued at least six months prior to the time limit for issuance of the order (i.e., within a period of 4 years and 6 months). This is considered an extended period of limitation.

Now a situation may arise where any Appellate Authority or Appellate Tribunal or court concludes that the notice issued invoking an extended period of limitation is not sustainable for the reason that the charges of fraud or any willful misstatement or suppression of facts to evade tax has not been established. In such a situation Sec. 75(2) of the CGST Act, 2017 provides that the officer shall determine the tax payable deeming as if the notice were issued invoking the normal period of limitation. Hence in such a situation, the officer is required to re-determine the liability for the normal period of limitation, if any.

CBIC in the said context has issued Circular No. 185/17/2022-GST dt. 27.12.2022 clarifying the following:

  • The proper officer is required to issue the order of redetermination of tax, interest and penalty payable within a period of two years from the date of communication of the direction by the appellate authority or appellate tribunal or the court, as the case may be (Sec. 75(3)).
  • For a particular financial year, the liability can be re-determined only if the SCN has been issued within 2 years and 9 months from the due date of furnishing of the annual return for the concerned financial year.
  • For multiple years, the liability can be re-determined only for those financial years for which the SCN has been issued within 2 years and 9 months from the due date of furnishing of the annual return for such financial years.
  • For refunds, the liability can be re-determined only if the SCN has been issued within 2 years and 9 months from the date of the erroneous refund.
  • Proceedings are to be dropped if they are hit by the limitation of time as specified above.

No-claim bonus

As per practice prevailing in the insurance sector, the insurance companies deduct the No Claim Bonus from the gross insurance premium amount, when no claim is made by the insured person during the previous insurance period(s). Circular No. 186/18/2022-GST dt. 27.12.2022 has been issued clarifying that a No Claim Bonus cannot be considered as a consideration for any supply provided by the insured to the insurance company. Hence such a No Claim Bonus shall not be liable to tax. Therefore, it transpires that GST shall be leviable on the actual insurance premium amount, payable by the policyholders to the insurer after the deduction of the No Claim Bonus mentioned on the invoice.

E-invoicing

Certain suppliers (e.g., GTA, banking companies, etc.) have been exempted from the mandatory generation of e-invoices. Circular No. 186/18/2022-GST dt. 27.12.2022 has been issued clarifying that the exemption from the generation of e-invoices is for the entity as a whole and is not restricted by the nature of supply being made by the said entity. Hence invoices issued for all supplies of goods or services by such suppliers shall not require e-invoicing.

Treatment of dues under the Insolvency and Bankruptcy Code, 2016

Earlier Circular No.134/04/2020-GST dt. 23.03.2020 was issued wherein it was clarified that no coercive action can be taken against the corporate debtor with respect to the dues of the period prior to the commencement of the Corporate Insolvency Resolution Process (CIRP). Such dues will be treated as ‘operational debt’ and the proper officer may file the claims before the NCLT in accordance with the provisions of the IBC.

Now Circular No. 187/19/2022-GST dt. 27.12.2022 has been issued clarifying that pursuant to Sec. 84 of the CGST Act, 2017 the recovery proceedings against the corporate debtor can be continued only for a reduced amount where the proceedings have been finalised under IBC reducing the amount of statutory dues payable by such corporate debtor to the government under CGST Act or under existing laws. Further pursuant to Rule 161 of the CGST Rules, 2017 the jurisdictional Commissioner shall issue an intimation in FORM GST DRC-25 reducing such demand (as indicated in FORM GST DRC-07/DRC 07A), to the taxable person or any other person as well as the appropriate authority with whom recovery proceedings are pending.

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