Circular No. 188/20/2022 – GST dated 27th December 2022

Manner of filing an application for refund by unregistered persons

Why this Circular?

This circular is issued on account of issues faced by Unregistered buyers of Building and issues faced by the Insured in case of long term Insurance Policies.

Issue faced by unregistered buyers of Building

  • 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.
  • Period for issuance of credit note on account of cancellation of service under the provisions of section 34 of the CGST Act, 2017 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.

Issue faced by Insured in case of long – term insurance policies

  • 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 been expired and therefore, the insurance companies may refund only the proportionate premium net off GST.

Section 54(1)

  • Any person can claim 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 from the relevant date in such form and manner as may be prescribed.

Section 54(8)(e)

  • In terms of section 54(8)(e), in case where the unregistered person has borne the incidence of tax and not passed on the same to any other person, the said refund shall be paid to him instead of being credited to Consumer Welfare Fund (CWF).

New Functionality in common portal

A new functionality had 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’.

Rule 89(2) amended vide Notification No. 26/2022 CT dated 26th Dec 2022

Rule 89(2) has been amended and statement 8 has been inserted in Form GST RFD – 01 vide Notification No. 26/2022 CT dated 26th Dec 2022 to provide for the documents required to be furnished along with the application for refund by the unregistered persons and the statement to be uploaded along with the said refund application.

Highlights of Circular No. 188202022 - GST dated 27.12.2022

Documents required to be furnished by the unregistered person

1. 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.

2. 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

Clarification by Circular

  • The unregistered person, who wants to file an application for refund under section 54(1) 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 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.
  • 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.

Application 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’.
  • The applicant shall upload statement 8 (in pdf format) and all the requisite documents as per the provisions of rule 89(2) of the CGST Rules.
  • The refund amount claimed shall not exceed the total amount of tax declared on the invoices in respect of which refund is being claimed.
  • Further, the applicant shall also upload the certificate issued by the supplier in terms of rule 89(2)(kb) 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.

Separate Applications for Refund in respect of invoices issued by different suppliers

  • 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 the each of the concerned States/UTs where the said supplier are registered.

Refund to be claimed only in case time period for issuance of credit notes has been expired

  • Where 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.

Relevant date for filing of refund

Date of issuance of letter of cancellation of the contract / agreement for supply by the supplier

Minimum Refund Amount

  • No refund shall be paid to the applicant if the amount is less than One Thousand Rupees.
  • Therefore no refund shall be claimed if the amount is less than One Thousand Rupees.

Process of Refund Claim by Proper Officer

  • 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
  • The proper officer shall also upload a detailed speaking order along with the refund sanction order in FORM GST RFD-06.

Proportionate Refund of Tax

  • In 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.

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Disclaimer: The contents of this article are for information purposes only and does not constitute an advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up.  The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that Author is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof. This is not any kind of advertisement or solicitation of work by a professional.

Author Bio

Qualification: CA in Job / Business
Company: N/A
Location: Chennai, Tamil Nadu, India
Member Since: 12 May 2020 | Total Posts: 11
Chartered Accountant by profession, faculty by passion. Faculty for Indirect Taxation for CA, CMA and CS students. Author of Book titled "GST - MCQ's for CA IPCC". Faculty for Certificate course in GST at ICAI. Speaker on GST in various forums and study circles. Email : deepikaaganesan@gmail.com View Full Profile

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