• Notification Date: 29-12-2022
• Notification No: N/A

CBIC declares Procedure for availing Refund of GST by Unregistered Buyers, Reversal and availing ITC in case of Non-payment

The government has notified the procedure for filing of refund of Goods and Services Tax by unregistered buyers in the case of cancellation of agreement for supply of service. The move has been made to benefit homebuyers in case of cancelled bookings. The procedure can also be used for refund in case of a cancelled long term insurance policy. 

Along with a few other measures and procedures, this move has also been notified by the Central Board of Indirect Taxes and Customs in line with the decisions taken at the 48th meeting of the Goods and Services Tax Council. 

Rule 37(1) of the CGST Rules has also been amended with effect from October 1, 2022. The new rule states that a registered person, who fails to pay to the supplier, the amount towards the value of such supply, whether wholly or partly along with the tax payable thereon, within the time limit, shall pay or reverse an amount equal to the ITC availed in respect of such supply proportionate to the amount not paid to the supplier along with interest. The notification has also covered a long pending demand of the industry for re-availment of credit in case of reversal of credit due to non-payment by the supplier by insertion of a new rule 37A. 

Abhishek Jain, Partner, Indirect Tax, KPMG in India, said that this inclusion merits attention as it provides for the instances and the manner where input tax credit is required to be reversed in case of non-payment of tax by supplier. Companies should be well-aware of these changes and align business practices accordingly, he added. 

Ankur Gupta, Practice Leader, Indirect Tax, SW India, highlighted that how the recipient would be informed that supplier has made the payment is yet to be known. Some other procedural issues have also been notified by the CBIC. These include making Aadhar-based biometric verification mandatory for individuals and authorised persons, insertion of a new rule to provide the facility for withdrawal of an application of appeal up to certain specified stage, and amending Rule 12(3) of the CGST Rule to state that the proper officer may cancel the registration on a request made in writing by a person to whom a registration has been granted.