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Table of Contents
F. No. CBIC-20001/2/2022 - GST
Government of India
Ministry of Finance
Department of Revenue
Central Board of Indirect Taxes and Customs
GST Policy Wing
*****
New Delhi, Dated the 27th December, 2022
Circular No. 188/20/2022 - GST: Prescribing Manner of Filing an Application for Refund by Unregistered Persons
To,
The Principal Chief Commissioners / Chief Commissioners / Principal Commissioners / Commissioners of Central Tax (All)
The Principal Directors General / Directors General (All) Madam/Sir,
Subject: Prescribing manner of filing an application for refund by unregistered persons-reg.
Instances have been brought to the notice where the 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.
In a number of such cases, the period for issuance of credit note on account of such cancellation of service under the provisions of section 34 of the Central Goods and Service Tax Act, 2017 (hereinafter referred to as ‘CGST Act’) 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.
1.2 Similar situation may arise 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. In some cases, the time period for issuing credit note under the provisions of section 34 of the CGST Act may have already expired and therefore, the insurance companies may refund only the proportionate premium net off GST.
1.3 Representations have been received requesting for providing a facility to such unregistered buyers/ recipients for claiming refund of amount of tax borne by them in the event of cancellation of the contract/agreement for supply of services of construction of flat/ building or on termination of long-term insurance policy.
2. It would be pertinent to mention that sub-section (1) of section 54 of the CGST Act already provides that 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.
Further, in terms of clause (e) of sub-section (8) of section 54 of the CGST Act, in cases 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).
2.1 In order to enable such unregistered person to file application for refund under sub- section (1) of section 54, 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, a new functionality has 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’.
Further, sub-rule (2) of rule 89 of Central Goods and Service Tax Rules, 2017 (hereinafter referred to as ‘CGST Rules’) has been amended and statement 8 has been inserted in FORM GST RFD-01 vide Notification No. 26/2022-Central Tax dated 26.12.2022 to provide for the documents required to be furnished along with the application of refund by the unregistered persons and the statement to be uploaded along with the said refund application.
3. In order to ensure uniformity in the implementation of the above provisions of the law across field formations, the Board, in exercise of its powers conferred by section 168(1) of the CGST Act, hereby clarifies the following:
4. Filing of refund application
4.1 The unregistered person, who wants to file an application for refund under sub-section (1) of section 54 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.
4.2 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 sub-rule (2) of rule 89 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 clause (kb) of sub-rule (2) of rule 89 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.
4.3 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.
4.4 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.
5. Relevant date for filing of refund:
As per sub-section (1) of section 54 of the CGST Act, time period of two years from the relevant date has been specified for filing an application of refund. Further, the relevant date in respect of cases of refund by a person other than supplier is the date of receipt of goods or services or both by such person in terms of provisions of clause (g) in Explanation (2) under section 54 of the CGST Act.
However, in respect of cases where the supplier and the unregistered person (recipient) have entered into a long-term contract/ agreement for the supply, with the provision of making payment in advance or in instalments, for example- construction of flats or long-term insurance policies, if the contract is cancelled/ terminated before completion of service for any reason, there may be no date of receipt of service, to the extent supply has not been made/ rendered.
Therefore, in such type of cases, it has been decided that for the purpose of determining relevant date in terms of clause (g) of Explanation (2) under section 54 of the CGST Act, date of issuance of letter of cancellation of the contract/ agreement for supply by the supplier will be considered as the date of receipt of the services by the applicant.
6. Minimum refund amount
Sub-section (14) of section 54 of the CGST Act provides that no refund under sub- section (5) or sub-section (6) shall be paid to an applicant, if amount is less than one thousand rupees. Therefore, no refund shall be claimed if the amount is less than one thousand rupees.
7. 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 accordingly. The proper officer shall also upload a detailed speaking order along with the refund sanction order in FORM GST RFD-06.
7.1 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.
8. It is requested that suitable trade notices may be issued to publicize the contents of this Circular.
9. Difficulty, if any, in the implementation of this Circular may be brought to the notice of the Board. Hindi version will follow.
(Sanjay Mangal)
Principal Commissioner (GST)
📚 Frequently Asked Questions (FAQs): Circular No. 188/20/2022 - GST
Q1. Can an unregistered person claim GST refund?
Answer: Yes, in specified situations. If an unregistered person has borne the GST and the supplier cannot issue a credit note due to expiry of the prescribed time limit, they can apply for refund through the special mechanism introduced by Circular 188. A temporary registration on the GST portal is required before filing the application.
Q2. Which situations are covered under this circular?
Answer: Primarily cancellation of construction service contracts and termination of long-term insurance policies. These are cases where GST was paid upfront, the service was not fully received, and the supplier cannot refund the GST through a credit note because the statutory time limit has expired.
Q3. Is GST registration compulsory for claiming this refund?
Answer: No, permanent GST registration is not required. Instead, the applicant must obtain a temporary registration using PAN, complete Aadhaar authentication, and furnish bank account details before filing the refund application.
Q4. Which form should be used for filing the refund application?
Answer: FORM GST RFD-01. The application must be filed under the category "Refund for Unregistered Person." Statement-8, supplier certificate, invoices, cancellation documents, and other supporting records should also be uploaded.
Q5. What documents should be attached with the application?
Answer: The required documents include Statement-8, supplier certificate, tax invoices, proof of payment, cancellation letter, bank account details, and evidence showing that the applicant bore the GST burden. Proper documentation helps the department verify the genuineness of the claim.
Q6. What is the time limit for filing the refund?
Answer: Generally within two years from the relevant date. For cancellation of construction contracts or termination of long-term insurance policies covered by this circular, the cancellation letter issued by the supplier is treated as the relevant date for computing the limitation period.
Q7. Can refund be claimed if the supplier can still issue a credit note?
Answer: No. If the supplier is still legally permitted to issue a credit note under Section 34, that route should be followed. The special refund mechanism is intended only for situations where the supplier is no longer eligible to issue a credit note.
Q8. Is a separate refund application required for different suppliers?
Answer: Yes. Separate refund applications must be filed for invoices issued by different suppliers. If those suppliers are registered in different States or Union Territories, separate temporary registrations are also required for each jurisdiction.
Q9. What happens if only part of the payment is refunded?
Answer: Only proportionate GST is refundable. The refund amount is linked to the actual amount returned by the supplier. If only part of the original consideration is refunded, the GST refund is also restricted proportionately.
Q10. Is there any minimum refund amount?
Answer: Yes. Refund claims below ₹1,000 are not admissible under Section 54(14) of the CGST Act. Applicants should ensure that the eligible refund exceeds this threshold before filing the application.
Q11. How does the GST department process the application?
Answer: The proper officer verifies eligibility and supporting documents. After examining the application and ensuring that the conditions are satisfied, the officer may sanction the refund through FORM GST RFD-06 along with a detailed speaking order.
Q12. Can a homebuyer directly benefit from this circular?
Answer: Yes, where the conditions are satisfied. Homebuyers who paid GST on under-construction properties and later cancelled their bookings after the credit note period expired can seek a refund directly from the Government through the prescribed process, provided they meet the eligibility requirements.
Conclusion
If you look at it practically, Circular No. 188/20/2022 closes a significant gap in the GST refund framework. Earlier, unregistered buyers could end up permanently bearing GST even when a transaction was cancelled and the supplier could no longer issue a credit note. By introducing a temporary registration facility and a dedicated refund process, the Government has provided a practical remedy for genuine cases.
Download PDF: Circular No. 188/20/2022 - GST
More Information: https://taxinformation.cbic.gov.in/
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