In the realm of India’s taxation system, the government has always sought ways to ensure fairness and ease of process. Circular No. 188/20/2022-GST, issued by the Central Board of Indirect Taxes and Customs under the Ministry of Finance, introduces guidelines on how unregistered individuals can file refund applications in specific scenarios. This circular provides insights into the procedures to
be followed, documents required, and the overall framework for unregistered persons to claim refunds in cases of contract cancellations or terminations. Lets develop into the details of this important circular and understand how it simplifies the refund process.
1. Background and Need for Refund Process Enhancement
The circular addresses a crucial issue that has arisen in cases involving unregistered buyers. Often, unregistered buyers enter into agreements or contracts with suppliers for various services, such as construction of flats or long-term insurance policies. However, due to factors like non-completion of projects or other reasons, these agreements may get cancelled or terminated. In such cases, the
unregistered buyers are entitled to refunds for the amounts they have paid, including applicable taxes. The circular aims to establish a streamlined process for these individuals to claim their rightful refunds.
2. Scope of Circular and Applicability
2.1 Contract Cancellations in Construction Sector
When unregistered buyers engage in contracts for services like construction of flats or buildings and the contract gets cancelled, they can claim refunds for the taxes they have borne. This circular provides clarity on the timeline and documents required for such claims.
2.2 Early Termination of Long-Term Insurance Policies
In cases of long-term insurance policies, where individuals pay upfront premiums along with GST,and the policy is terminated before its completion, the circular facilitates the refund process for theproportionate premium amount net of GST.
3. Streamlined Refund Application Process
To cater to the specific needs of unregistered persons seeking refunds, the circular introduces a new functionality on the common portal. This functionality allows these individuals to apply for a temporary registration and file refund applications under the category “Refund for Unregistered Person”
3.1 Obtaining Temporary Registration
Unregistered persons wishing to claim refunds must obtain temporary registration on the common portal using their Permanent Account Number (PAN). During this process, they should select the same state/union territory as their supplier for whom the refund is being claimed.
3.2 Aadhaar Authentication
Aadhaar authentication is a crucial step in the refund application process. The circular mandates that unregistered individuals undergo Aadhaar authentication as per the provisions of rule 10B of the Central Goods and Service Tax Rules.
3.3 Bank Account Details
Unregistered persons must provide their bank account details for refund disbursement. These details should correspond with the bank account linked to their PAN.
4. Filing Refund Application - Form GST RFD-01
The circular specifies the procedure for filing refund applications using Form GST RFD-01 under the category Refund for Unregistered Person. Key points to note during the application process are as follows:
4.1 Document Submission
Applicants must upload statement 8 (in PDF format) and other requisite documents as per sub-rule(2) of rule 89 of the Central Goods and Service Tax Rules. The refund claimed should not exceed the total amount of tax declared on the invoices related to the refund.
4.2 Supplier's Certificate
Applicants should also upload the certificate issued by the supplier, which verifies that the tax incidence has been borne by the applicant and not passed on to any other party.
4.3 Multiple Applications for Different Suppliers
In scenarios involving multiple suppliers from different states/union territories, applicants need to file separate refund applications for each supplier.
4.4 Expired Credit Note Period
Unregistered persons can file refund claims only when the time period for issuing credit notes under section 34 of the CGST Act has already expired at the time of cancellation/termination of theagreement/contract.
5. Determining the Relevant Date
The circular addresses the challenge of determining the relevant date for filing a refund application in cases where the supply has not been made or rendered due to cancellation/termination of the agreement. In such cases, the date of issuance of the cancellation letter by the supplier will be considered the date of receipt of services.
6. Minimum Refund Amount
As per sub-section (14) of section 54 of the CGST Act, refunds will not be paid if the claimed amount is less than one thousand rupees.
7. Processing and Disbursement of Refund
The proper officer responsible for processing refund claims will follow a similar procedure as for other RFD-01 claims. Once the refund is approved, a detailed refund sanction order will be issued,and the proper officer will upload a speaking order along with the refund sanction order in Form GST RFD-06.
8. Public Awareness and Implementation
The circular encourages field formations to disseminate the information to relevant stakeholders through suitable trade notices.
Conclusion
Circular No. 188/20/2022-GST stands as a testament to the Indian government commitment to simplifying tax-related processes and ensuring fairness. By providing clear guidelines and procedures for unregistered individuals to claim refunds, this circular empowers taxpayers and streamlines the refund process in cases of contract cancellations and policy terminations.
FAQs
1. Q: Can unregistered individuals claim refunds for cancelled contracts?
A: Yes, unregistered individuals can claim refunds for cancelled contracts under specific conditionsas outlined in the circular.
2. Q: Is Aadhaar authentication mandatory for the refund application process?
A: Yes, Aadhaar authentication is a mandatory step for unregistered individuals filing refund applications.
3. Q: What is the relevance of the date of cancellation in the refund process?
A: The date of issuance of the cancellation letter by the supplier is considered the date of receipt of services in cases where supply has not been made due to cancellation.it means refund application shall be apply within 2 years after cancellation agreement .
4. Q: Are there any minimum refund amount criteria?
A: Refunds will not be paid if the claimed amount is less than one thousand rupees, as per section 54 of the CGST Act.
5. Q: How will the refund application be processed?
A: The proper officer will scrutinize the application and issue a refund sanction order, along with adetailed speaking order, if eligible.
For more detailed information, please refer to [Circular No. 188/20/2022-GST (https://taxlawkerala).