Clarification in respect of certain challenges faced by the registered persons in implementation of provisions of GST Laws in the current lockdown situation

[Ganeshan Kalyani]

The Government has given relief in the compliance of GST in view of the current lockdown situation arisen due to COVID-19 vide Notification no. 30 to 35 on 03.04.2020. Then a Circular no.136/06/2020-GST was issued on the same date to clarify the amendments that was done through the aforesaid Notifications. Now, the Board has issued a Circular no. 137/07/2020-GST on 13.04.2020 to clarify certain difficulties that the taxpayers were facing in adhering to the compliance requirements under various other provisions of the CGST Act. Those clarifications are given below:

Issue 1 : A supplier has received an advance for supply of service to be made in future. He also raised an invoice and paid GST to the Govt. Subsequently, the Service contract got cancelled. In such situation, whether the supplier can claim refund of tax paid or is he required to adjust his tax liability in his returns ?

Clarification : In such case, the supplier is required to issue a “credit note” in terms of section 34 of the CGST Act, 2017. He 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.

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 2 : A supplier has received an advance for supply of service to be made in future. He issued receipt voucher. Subsequently, the Service contract got cancelled. Whether he can claim refund of tax paid on advance or he is required to adjust his tax liability in his returns?

Clarification : 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, he is required to issue a “refund voucher”. Further, the taxpayer can apply for refund of GST paid on such advances by filing FORM GST RFD-01 under the category “Refund of excess payment of tax”.

Issue 3 : Goods supplied by a supplier under cover of a tax invoice are returned by the recipient. Whether he can claim refund of tax paid or is he required to adjust his tax liability in his returns ?

Clarification : In such case, the supplier is required to issue a “credit note” in terms of section 34 of the CGST Act, 2017. He 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.

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 4 : Letter of Undertaking (LUT) furnished for the purposes of zero-rated supplies has expired on 31.03.2020. Whether a registered person can still make a zero-rated supply on such LUT and claim refund accordingly or does he have to make such supplies on payment of IGST and claim refund of such IGST ?

Clarification : LUT to be furnished for a financial year. However, notification No. 35/2020 Central Tax dated 03.04.2020 has relaxed the requirement under the GST Law for furnishing of any report, document, return, statement or such other record falls during between the period from 20.03.2020 to 29.06.2020 till 30.06.2020. Therefore, time limit for filing of LUT for the year 2020-21 shall stand extended to 30.06.2020 and the taxpayer can continue to make the supply without payment of tax under LUT provided that the FORM GST RFD-11 for 2020-21 is furnished on or before 30.06.2020. Taxpayers may quote the reference no of the LUT for the year 2019-20 in the relevant documents.

Issue 5 : While making the payment to recipient, amount equivalent to one per cent was deducted as per the provisions of section 51 of Central Goods and Services Tax Act, 2017 i. e. Tax Deducted at Source (TDS). Whether the date of deposit of such payment has also been extended vide notification N. 35/2020-Central Tax dated 03.04.2020?

Clarification : As per notification No. 35/2020-Central Tax dated 03.04.2020, where the timeline for any compliance required as per sub-section (3) of section 39 and section 51 of the Central Goods and Services Tax Act, 2017 falls during the period from 20.03.2020 to 29.06.2020, the same has been extended till 30.06.2020. Accordingly, the due date for furnishing of return in FORM GSTR-7 along with deposit of tax deducted for the said period has also been extended till 30.06.2020 and no interest under section 50 shall be leviable if tax deducted is deposited by 30.06.2020.

Issue 6 : As per section 54 (1), a person is required to make an application before expiry of two years from the relevant date. If in a particular case, date for making an application for refund expires on 31.03.2020, can such person make an application for refund before 29.07.2020?

Clarification : As per notification No. 35/2020-Central Tax dated 03.04.2020, where the timeline for any compliance required as per sub-section (1) of section 54 of the Central Goods and Services Tax Act, 2017 falls during the period from 20.03.2020 to 29.06.2020, the same has been extended till 30.06.2020. Accordingly, the due date for filing an application for refund falling during the said period has also been extended till 30.06.2020. 

Refer Circular No. 137/07/2020-GST dated 13.04.2020.

Take care of yourself and your family. Maintain hygiene and stay safe.