Circular No. 137/07/2020-GST dated 13.04.2020 has been issued providing clarifications regarding certain challenges being faced by taxpayers in adhering to the compliance requirements under various other provisions of the CGST Act.
We all are aware that that vide notification no. 66/2017-CGST dated 15-11-17, the government removed the requirement of payment of tax on advances in case of supply of goods. However, service providers still have to comply that requirement of payment of GST on advances received.
Issue No. 1: A service supplier has issued an invoice for supply of service, received advance against it and paid GST thereon. Now the service contract has subsequently been cancelled. Can he claim refund of tax paid or should adjust his tax liability in returns?
Clarification: In the above scenario,
• The supplier of service is required to issue a credit note for the service u/s 34 of the CGST Act.
• Declare details of such credit note in the return for the month during which the credit note has been issued.
• Liability of tax shall be adjusted in the return as per sec 34 of the CGST Act.
• No need to file separate return.
• But if there is no output liability against which a credit note can be issued, then registered persons may proceed to file a claim under 'Excess payment of tax, if any' through FORM GST RFD-01.
Issue No. 2: A supplier has issued a receipt voucher for a service contract, received advance against it and paid GST thereon. Now the service contract has subsequently been cancelled. Can he claim refund of tax paid or should adjust his tax liability in returns?
Clarification:
• The supplier of service is required to issue a 'refund voucher' u/s 31(3)(e)of CGST Act read with rule 51.
• The supplier will apply for refund of the GST paid in FORM GST RFD-01under the category 'Refund of Excess Payment of Tax'.
Let us understand this with the help of example- Mr. A is Chartered Accountant by profession and therefore, he is engaged in providing consultancy services. He receives Rs. 50,000 from a client in advance against the consultancy services yet to be provided. In the given case, there can be two possible scenarios-
1. Mr. A has issued tax invoice in respect of advance received before supply of service and paid tax in return; or
2. Mr. A has issued receipt voucher in respect of advance received before supply of service and paid tax in return.
Due to some circumstances, Mr. A didn't provide the said services to the client and refunded Rs. 50,000 to him. In case 1, A is required to issue credit note against the invoice issued or in case there is no output liability against which a credit note can be issued and adjusted in GSTR 3B return, then he may proceed to file a claim under 'Excess payment of tax, if any' through FORM GST RFD-01. If in case, Mr. A has no inter-state sale in near future and payment of taxes on advances were made in IGST ledger, then he can claim the refund.
In case 2, A has to issue a refund voucher and he can file refund claim under 'Excess payment of tax, if any' through FORM GST RFD-01. A has paid tax @18% on Rs.50,000 i.e. Rs. 9000, therefore, he can't adjust the same in outward liability and claim refund of Rs.9000 in RFD-01.
Currently, advance tax payment is shown as part of column 3(1)(a) Outward taxable supplies (other than zero rated, nil rated and exempted) and adjusted in the month as and when invoice is issued.
Issue No. 3: Goods are supplied by the supplier along with a tax invoice, but the goods are subsequently returned by the recipient. Can he claim refund of tax paid or should adjust his tax liability in returns?
Clarification:
• The supplier of goods is required to issue a credit note for the service u/s 34 of the CGST Act.
• Declare details of such credit note in the return for the month during which the credit note has been issued in GSTR 1 and reduce the outward tax liability in GSTR 3B.
• But if there is no output liability against which a credit note can be issued, then registered persons may proceed to file a claim under 'Excess payment of tax, if any' through FORM GST RFD-01.
E.g. Mr. X sells 100 pens of Rs. 10 each to Mrs. S on 30.03.2020. Mrs. S finds 10 pens are defective and returns them on 03.04.2020. Mr. X will issue a credit note for Rs. 100 (10 x Rs.10) on 03.04.2020. He will show the credit note in his GSTR-1 of April 2020 month. The credit note will automatically flow into Mrs. S's (buyer) GSTR-2 as a debit note.
Issue No. 4: If a LUT for the purpose of zero rated supplies u/s 16 of IGST Act, 2017 read with rule 96A of CGST Act has expired on 31.03.2020, Can a registered person still continue with zero rated supplies on such LUT and claim refund accordingly or does he require to pay IGST on such supplies and claim refund of such IGST?
Clarification: In the above scenario,
- In terms of Notification No. 35/2020-Central Tax dated 03.04.2020, time limit for filing of LUT for the year 2020-21 shall stand extended to 30.06.2020
- The taxpayer can continue to make supply without payment of tax under the existing LUT provided that the FORM GST RFD-11 for 2020-21 is furnished on or before 30.6.2020.
- Taxpayers may quote reference no. of the existing LUT for 2019-20 in the relevant documents.
This clarification has provided sigh of relief to many taxpayers. Due to complete lockdown in county, all the factories are shut down and many taxpayers are unable to furnish LUT for the new financial year 2020-21 on the online portal due to non availability of DSC in hand. We have already opined in our Hindi update that date of filing of LUT has been extended and requested to CBIC to issue clarification. We appreciate the effort of CBIC to issue clarification in this crucial time of lockdown due to Crona virus.
Issue No. 5: TDS (Tax Deducted AT Source) @1% was deducted u/s 51 of CGST Act while making payment to the recipient. Whether the date of deposit of such payment also been extended vide notification 35/2020-Central Tax dated 03.04.2020?
Clarification: The time limit for any compliance required u/s 39(3) and sec 51 of CGST Act falls during the period 20.03.2020 to 29.06.2020; stands extended till 30.06.2020. Accordingly, the due date for deposit of TDS for the said period along with return in FORM GSTR-7 stands extended till 30.06.2020.
Vide notification 35/2020, Section 39- E-Furnishing of Returns, except sub-section (3), (4) and (5) was specifically excluded from the relaxation of general extension.
Therefore, in terms of Notification No. 35/2020 (effective w.e.f. March 20, 2020) it is stated that the said class of taxpayers have been allowed to furnish the respective returns specified in sub-sections (3) i.e. Tax Deducted at Source (Form GSTR-7), (4) i.e. Input Service Distributor(Form GSTR-6) and (5) i.e. Non-Resident Taxable Person (GSTR – 5), of section 39 of the CGST Act, for the months of March, 2020 to May, 2020 to be filed on or before the June 30, 2020. We have also clarified the same in our Hindi update that the time limit of filing of TDS returns has been extended.
No interest u/s 50 shall be charged if TDS is deposited by 30.06.2020.
Issue No. 6: If the last date for application of refund u/s 54(1)expires on 31.03.2020, can an application for refund still be made before 29.07.2020?
Clarification:
- In such a case as above, the application of refund can be made on or before 30.06.2020.
- The time line for any compliance required u/s 54(1) of CGST Act, 2017 that falls between 20.03.2020 to 29.06.2020 has been extended till 30.06.2020 through notification no. 35/2020-Central tax dated 03.04.2020.
- Under GST, the applicant should file GST refund claims within 2 years from the relevant date as explained in Section 54 of the CGST Act, 2017. Relevant date is explained vide Para 2 of the Explanation to the Section 54 of the CGST Act. This clarification is applicable on all types of refund claims like refund of IGST under export with payment of duty, unutilised ITC, refund due to appeal, order etc. , excess payment of tax, deemed exports etc.
These clarifications will be helpful for the all the taxpayers facing problems in their regular routine. Moreover, we already brought to notice about the extension of filing of TDS return through our updates to our vigilant readers.
The trade and industry should welcome the efforts of officers of CBIC to issue clarifications in such a difficult time of lockdown due to COVID-19 position. They are working very hard to bring notifications, circulars, clarifications so that there is no problem to taxpayers of this country. We are appreciating doctors; medical staff, police etc but these officers and employees of CBIC should be welcomed to assist the taxpayers, Government and consequently the country.
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