GST treatment on cancellation of contract/ agreement of sale of Flat/building or insurance policy where the buyer or insurer was not registered under GST

GST treatment on cancellation of contract/ agreement of sale of Flat/building or insurance policy where the buyer or insurer was not registered under GST

I. GROUND OR REASON OF REFUND

Unregistered person had entered into an agreement/ contract with a builder for supply of services of construction of flats/ building, etc.

OR

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 and the time period for issuing credit note have already expired and therefore, the insurance companies may refund only the proportionate premium net off GST.

&

Unregistered person paid the consideration/price for such service, either fully or partially, along with applicable tax/GST

&

Said contract/ agreement cancelled subsequently may be due to non-completion or delay in construction activity in time or any other reasons

&

At the time of cancellation/termination of agreement/contract for supply of services, the time period for issuance of credit note (The thirtieth day of November following the end of the financial year in which such supply was made) has already expired. (In cases where the time period for issuance of credit note is NOT EXPIRED, the supplier would be in a position to 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 this case.)

In the case elaborated above, unregistered person may apply for refund of GST paid to the builder or insurance company as the case may be in the following manner;

II. Procedure for Filing of refund application

The unregistered person, shall obtain a temporary registration on the common portal using his Permanent Account Number (PAN).

While obtaining the temporary registration unregistered person shall select the same state/UT where his/her supplier is registered- 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

Thereafter Aadhaar authentication

While obtaining the temporary registration unregistered person shall enter his bank account details (which is in his name and has been obtained on his PAN) in which he seeks to obtain the refund of the amount claimed.

III. Forms and documents

 The application for refund shall be filed in FORM GST RFD-01on the common portal under the category ‘Refund for unregistered 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.

 Separate applications for refund have to be filed in respect of invoices issued by different suppliers.

 A statement (SATEMENT-08 AS PER CGST RULE 2017) 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 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;

 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.

IV. Relevant date for filing of refund:

Two years from the date of issuance of letter of cancellation of the contract/ agreement for supply by the supplier.

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Disclaimer: Effort have been made to make document error free, but it is possible that some error might have crept into this document. Prepared and Compiled by: CA Rajnish Kumar, New Delhi-110092, email: carajnishkumarca@gmail.com, Mobile +91-8130883807