Unregistered persons can claim tax refunds for cancelled contracts on GST portal

New Delhi: Unregistered persons can claim Goods and Services Tax refunds for cancelled contracts or premature termination of insurance policies by obtaining temporary registration on the GST portal, the finance ministry has said.

The new functionality 'Refund for Unregistered person' has been made available on the GST portal and the unregistered person, who wants to file an application for a refund shall obtain a temporary registration on the common portal, using his Permanent Account Number (PAN).

In a circular, the Central Board of Indirect Taxes and Customs (CBIC) said it had received representations requesting for providing a facility to unregistered buyers/ recipients for claiming a refund of the amount of tax borne by them in the event of cancellation of the contract/agreement for the supply of services of construction of flat/ building or on termination of a long-term insurance policy.

"In order to enable such unregistered person to file application for a refund..., in cases where the contract/agreement for the 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 a refund under the category 'Refund for Unregistered person'," the CBIC said.

The unregistered taxpayer can file for refunds within two years of the relevant date -- it would be the date of receipt of goods/services or letter of cancellation of contract/agreement.

The GST Council in its 48th meeting on December 17 had recommended amendment to CGST Rules, along with the issuance of a circular, to prescribe the procedure for filing an application for refund by the unregistered buyers in such cases.

So far, there was no procedure for claiming a refund of tax borne by the unregistered buyers in cases where the contract/agreement for the supply of services, like construction of flat/house and long-term insurance policy, is cancelled and the time period of issuance of credit note by the concerned supplier is over.

To claim refunds, 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 and also undertake Aadhaar authentication.

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 and upload all the requisite documents.

KPMG in India, Partner Indirect Tax, Abhishek Jain said in line with the GST Council recommendation procedure to claim a refund of tax borne by the unregistered buyers has been released for cases where the contract/ agreement for the supply of services, like construction of flat/house and long-term insurance policy, is cancelled and the time period of issuance of credit note by the concerned supplier is over.

"This will allow the unregistered buyers to get a refund of the GST where supply has not taken place, and will help avoid unnecessary cost burden, and should be perused by the common public facing such instances," Jain said.