Is Gst Not Refundable Is The Service Is Cancelled In India

Topics covered in this article are as follows:

Introduction
Credit note can be issued just it would non be helpful
No pick for issuance of refund voucher
Government's conclusion to extend the benefit of Refund
Taxmann's Comments

GST Refund on Cancellation of Service Contracts

1. Introduction

Under the GST law, a supplier is liable to pay GST on the receipt of advance for the supply of services. In this case, a Receipt voucher/Taxation Invoice would be required to be issued. In this Covid-nineteen pandemic, many pre-booked orders by hotels, event organisers for meetings, exhibitions, conferences, and other events (generally referred to as 'MICE' services) have been cancelled due to the lockdown, etc. restrictions by the Authorities(due south) to terminate the spread of Corona-virus.

In general, a taxpayer can merits the aligning of tax already paid in respect of invoices for which no supply has been provided by manner of the issuance of a credit annotation.

However, the pandemic has affected severally to the Entertainment and Hospitality sectors. Thus, the availability of refund of revenue enhancement already paid, instead of its adjustment, if available, would be a relief for the said taxpayers.

In this article, we take analysed the availability of the refund of such tax paid by these taxpayers.

two. Credit annotation can exist issued but information technology would not be helpful

As per the provisions of GST law, a person is required to issue a credit annotation[1] for those invoices which are issued for supplies that are subsequently identified as scarce. In this case, the details for such credit note are required to exist reported in the returns of the month in which such credit note has been issued. The taxpayer can claim the adjustment of taxation in such return.

Due to Covid-19 restrictions and lockdown situations, the business of all the sectors including the MICE agencies got interrupted, thus the adjustment of already paid GST on advances received for cancelled events was non possible as there are no/ negligible outward tax liabilities.

iii. No option for issuance of refund voucher

As per the provisions of the GST law, a supplier is required to pay the GST on the receipt of the advances for the supply of services and have to issue the receipt voucher. In a instance, where the supply of service is cancelled afterward and besides 'no invoice is issued' and so the supplier can event the refund voucher and can claim a refund of the tax information technology had paid earlier. Notably, refund voucher cannot be issued in cases where the taxation invoice is issued.

iv. Regime'due south decision to extend the benefit of Refund

Every bit a relief measure of COVID-nineteen, the CBIC has antiseptic[2] that where a supplier has paid GST on receipt of advance and 'issued an invoice' for the futurity supply which subsequently got cancelled, in such a case, a supplier can result the credit note and where the supplier is not having any tax liability in the month in which the credit note is issued then he 'can file Class GST RFD – 01' under the category ' Excess Payment of taxation, if whatever '.

GST is levied on the supply of goods or services or both. The supply has been divers to include sale, exchange, castling etc. made or 'agreed to exist made' for a consideration.

Farther, the time of supply provisions under the GST law determines the time when the liability to pay tax arises. In the given case, the time of supply arises on the date of issuance of the invoice past the MICE agencies. The levy and liability to pay tax take arisen on the date of issuance of the tax invoices. Thus, as per police force, the credit note can only exist issued for claiming the adjustment of tax already paid. In other words, no refund pick is available under the constabulary.

In the above properties, information technology may be said in order to provide the relief in the scenarios like the impugned one, the CBIC has provided an extended benefit which is surely an observable move.

Farther, in our view, the applicability of this description in general scenarios seems hundred-to-one (i.east. refund benefit would not exist available).

[i] Section 34 of CGST Act, 2017

[2] Round No. 137/07/2020-GST dated April thirteen, 2020

Disclaimer: The content/data published on the website is only for general information of the user and shall not be construed as legal communication. While the Taxmann has exercised reasonable efforts to ensure the veracity of data/content published, Taxmann shall be nether no liability in any mode whatever for incorrect information, if any.