Claim Refund (RFD-01) of GST paid on Advance received but Services not rendered due to Covid-19

The CBIC vide Circular No.137/07/2020 – GST, dated April 13, 2020, which clarified the challenges faced by the registered persons in adhering to the provisions of the Central Goods & Services Act, 2017 (“CGST Act”) on account of measures taken to prevent the spread of COVID-19. The following are the appended clarification made by the department are as under:-

Issue No. 01:-

An advance is received by a supplier for a Service contract which subsequently got cancelled. The supplier has issued the invoice before the supply of service and paid the GST thereon. Whether the supplier can claim a refund of tax paid or he is required to adjust his tax liability in his returns?

Clarification No. 01:-

In case GST is paid by the supplier on advances received for a future event which got cancelled subsequently and for which invoice is issued before the supply of service, the supplier is required to issue a “credit note” in terms of section 34 of the CGST Act. The supplier shall declare the details of such credit notes in the return for the month during which such credit note has been issued. The tax liability shall be adjusted in the return subject to conditions of section 34 of the CGST Act. There is no need to file a separate refund claim. However, in cases where there is no output liability against which a credit note can be adjusted, registered persons may proceed to file a claim under “Excess payment of tax, if any” through FORM GST RFD-01.

Issue No. 02:-

An advance is received by a supplier for a Service contract which got cancelled subsequently. The supplier has issued receipt voucher and paid the GST on such advance received. Whether the supplier can claim a refund of tax paid on advance or he is required to adjust his tax liability in his returns?

Clarification No. 02:-

In case GST is paid by the supplier on advances received for an event which got cancelled subsequently and for which no invoice has been issued in terms of section 31 (2) of the CGST Act, the supplier is required to issue a “refund voucher” in terms of section 31(3)(e) of the CGST Act read with rule 51 of the CGST Rules, 2017. The taxpayer can apply for a refund of GST paid on such advances by filing FORM GST RFD-01 under the category “Refund of excess payment of tax”.