Cancellation of Order - GST Refund Procedure

The global pandemic, COVID-19, has significantly impacted businesses, leading to disruptions and cancellations of orders. In response, the Central Board of Indirect Taxes and Customs (CBIC) issued GST Circular No. 137/07/2020 on 13th April 2020 to clarify the procedure for claiming GST refunds. More details can be found in the cancellation of order GST refund procedure.

Service Contract Cancellation - Invoice Issued - Advance Received

When a supplier receives an advance for a service contract that is subsequently cancelled, an invoice might have been issued, and GST paid. In such a scenario, the question arises whether the supplier can reclaim the tax paid or must adjust their tax liability instead.

Solution:

If GST has been paid on the advance, and the order is cancelled, the supplier should issue a credit note as per Section 34 of the CGST Act. This ensures automatic adjustment of the tax liability in the supplier's monthly GST return, rendering refund claims unnecessary. For more guidance, refer to the GST refund process guide. In situations where no output liability exists to adjust against the credit, the supplier may file a claim under “Excess payment of tax, if any” using FORM GST RFD-01.

Service Contract Cancellation - Receipt Issued - Advance Received

In cases where advance payment for a cancelled service was received without invoice issuance, can the supplier claim a GST refund or adjust the liability?

Solution:

In such cases, the supplier should issue a refund voucher under Section 31(3) of the GST Act. Furthermore, the taxpayer can submit FORM GST RFD-01 to reclaim the GST paid on these advances under the category “Refund of excess payment of tax.” Learn more about the benefits of the GST refund process here.

Goods Returned - Invoice Issued

When goods are supplied based on an invoice and then returned, the supplier must decide whether to claim a refund for the GST paid or adjust their GST liability.

Solution:

The supplier is required to issue a credit note according to Section 34 of the CGST Act. Including the details of the credit note in the GST return will automatically adjust the tax liability, eliminating the need for separate refund claims.

If no output exists to make adjustments, a claim can be made for any excess tax paid through FORM GST RFD-01. More information on this process can be found in the comprehensive GST refund guide.

For more details and access to the circular referenced in this process, visit this link.

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Frequently Asked Questions

Common questions about Cancellation of Order GST Refund Procedure.

The supplier does not need to claim a refund in this case. Instead, the supplier should issue a credit note under Section 34 of the CGST Act, and the details of the credit note must be declared in the monthly GST return. The tax liability will be automatically adjusted based on the credit note details filed.

When goods are returned after an invoice has been issued, the supplier is required to issue a "credit note" in terms of section 34 of the CGST Act. The details of all credit notes issued are mentioned in the GST return, and there is no requirement to claim a separate refund as the output liability is automatically adjusted.

If there is no output liability to adjust the credit after issuing a credit note, the registered taxpayer can file a claim under "Excess payment of tax, if any" through FORM GST RFD-01.

The GST Circular No. 137/07/2020 issued by the CBIC on 13th April 2020 clarifies the acceptable procedure for GST refunds in cases of disruption and cancellation of orders due to COVID-19.

A supplier should issue a credit note under Section 34 of the CGST Act when goods or services are returned, or when there is a downward revision in the value of goods or services supplied.

A credit note is issued when an invoice has already been raised, and it adjusts the tax liability. A refund voucher is issued when no invoice has been raised, and it allows the supplier to claim a refund of GST paid on advances received.

No, if an invoice has been issued and GST paid on advances received, the supplier cannot claim a refund directly. Instead, they must issue a credit note, and the tax liability will be automatically adjusted based on the credit note details filed in the GST return.

No, the process for claiming GST refunds or adjusting tax liability in cases of cancellation of orders or returns is the same for both goods and services, as outlined in the GST Circular No. 137/07/2020.