Mechanism of refund / adjustment of tax paid in following situations as per Circular No 137/07/2020-GST dated 13-04-2020
Sl.No
Situation
Advance received
Invoice Issued
Supply made
Mechanism of refund / adjustment of tax
1.
Cancellation of service contract and refund of advance.
Yes
Yes
No
Adjustment against output tax liability by issuing credit note. In absence of output tax liability, refund can be claimed.*
2.
Return of Goods by recipient.
Not relevant
Yes
Yes
Same as above*.
3.
Cancellation of service contract and refund of advance.
Yes
No
No
Issue of refund voucher and apply for refund of GST**.
* The supplier is required to issue a “credit note” as per sec 34 of the CGST Act and declare it in the return for the month of issuance of credit note wherein the tax liability shall be adjusted against outward tax liability. There is no need to file a separate refund claim. In cases where there is no output liability available for adjustment refund claim in FORM GST RFD-01 to be filed under category “Excess payment of tax, if any”. Credit note should be issued within the time prescribed under Sec 34(2) of the CGST Act viz Not later than September, following the FY when supply was made or date of furnishing relevant annual return, whichever is earlier.
** In this case as tax invoice has not been issued, credit note cannot be issued and thus “Refund voucher” in terms of section 31 (3) (e) of the CGST Act read with rule 51 of the CGST Rules is to be issued by the supplier who can then apply for refund of GST paid on such advances by filing FORM GST RFD-01 under the category “Refund of excess payment of tax”. It is important to note here that adjustment against output tax liability in this case not permitted.
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