Anil Kumar
Treatment of ‘Goods Returned’ and ‘Cancellation of Contract of Service against which Advance Received’, under GST.
Introduction: Covid-19, is a Pandemic which has spreads across the global, in meantime the Government of India had taken various major relief for the taxpayers under Direct Tax & Indirect Tax in the recent time period through Notification, Circulars, Clarification and FAQs.
In this article I would be discuss Circulars No. 137/07/2020-GST, Clarification in respect of certain challenges faced by the registered persons in implementation of provisions of GST Laws, issued by CBEC on dated 13/04/2020.
Issue-1: Goods supplied by a supplier under cover of a tax invoice are returned by the recipient. Whether he can claim refund of tax paid or is he required to adjust his tax liability in his returns (i.e. Goods returned) ?
Solution: First thing, circular is discussing only about Goods return because it is not possible in case of provision of services. Second, a Tax Invoice has issued as per Section 31, CGST Act, 2017. Now in this case supplier is required to issue a “Credit Note” in terms of Section 34, CGST Act, 2017. He shall declare the details of such credit notes in the return (under which invoice level detail required) for the month during which such credit note has been issued. The tax liability shall be adjusted in the return subject to conditions of section 34 of the CGST Act.
However, in cases where there is no output liability against which a credit note can be adjusted, registered persons may proceed to file a claim under “Excess payment of tax, if any” through FORM GST RFD-01.
Issue-2: An advance is received by a supplier for a Service contract which subsequently got cancelled. The supplier has issued the invoice before supply of service and paid the GST thereon.
Solution: First thing, circular is discussing a situation where supplier has issued Invoice before supply of service. Here is the time of supply of service,If invoice is issued within the period prescribed*, Earlier of following
a)The date of issuing invoice
OR
b)The date of receipt of payment
In this issue payment is received and as per above provision tax is paid to the Government on such advance.
Now the supplier is required to issue a “credit note” in terms of section 34 of the CGST Act. This is because supplier has issued a Invoice. He shall declare the details of such credit notes in the return for the month during which such credit note has been issued. The tax liability shall be adjusted in the return subject to conditions of section 34 of the CGST Act. There is no need to file a separate refund claim.
However, in cases where there is no output liability against
which a credit note can be adjusted, registered persons may proceed to file a claim under “Excess payment of tax, if any”through FORM GST RFD-01.
Issue-3: An advance is received by a supplier for a Service contract which got cancelled subsequently. The supplier has issued receipt voucher and paid the GST on such advance received.
Solution: Now in this issue, supplier has issued a receipt voucher on receipt of advance and not an Invoice. He is required to issue a “refund voucher” because no invoice has issued in this issue, in terms of section 31 (3) (e) of the CGST Act read with rule 51 of the CGST Rules.
The taxpayer has only option to get back of tax already paid, to apply for refund of GST paid on such advances by filing FORM GST RFD-01 under the category
“Refund of excess payment of tax”.
Time Limit to declare Credit Note: In the return for the month during which such credit note has been issued but not later than September following the end of the financial year in which such supply was made, or the date of furnishing of the relevant annual return, whichever is earlier.
Great….such a knowledgeable article …am appriciate….👍