CBDT Clarifies Issues Related to Challenges Regarding Implementation of Provisions of GST Laws Faced by Registered Persons

Deepti Shikha

18 Feb, 2021

The Department issues circulars to provide any clarifications to a large number of people regarding the decisions taken or to communicate the decisions made. Whereas the Department also issues orders for an immediate effect of compliance regarding any matter that needs attention.

The Department issued Circular Number-136/06/2020-GST, dated on 3^rd April 2020 to clarify doubts related to the relief measures taken by the Government for facilitating taxpayers in meeting of the compliance requirements under various provisions of the Central Goods and Services Tax (CGST) Act, 2017 because of the ongoing lockdown situation due to the spread of Corona Virus (COVID-19). The Board noticed that the taxpayers are facing particular challenges in adhering to the compliance requirements or in implementation of provisions of GST laws or the CGST Act, which needs to be clarified.

The issues raised have been examined and also to ensure uniformity in the implementation of provisions of GST laws across the field formations, the Board by using its powers under Section 168(1) of the CGST Act hereby clarifies as below:

Read our article:Appeals Under GST (Goods and Service Tax)

Issue 1

For supply of services/ products, the seller has received an advance amount for a service contract, which later on got cancelled due to the ongoing lockdown situation. The supplier here had also issued an invoice before the supply of service and subsequently paid GST thereon. Here the doubt arises that whether the supplier can claim a refund of the tax paid, or is he required to adjust his tax liability in his returns?

Clarification- In this case, where the GST was paid by the supplier on advances received for an event to be conducted in future which got subsequently got cancelled and for which invoice was also issued before the supply of service, the supplier in this situation needs to issue a “credit note” according to section 34 of the CGST Act, 2017. The supplier shall declare the details of the credit notes issued in return for the particular month during which such credit note has been issued. The tax liability must be adjusted in return subject to the terms and conditions of section 34 of the CGST Act.

The supplier does not need to file a separate refund claim in these circumstances. Further, if there is no output liability against which a credit note can be adjusted, the registered persons can proceed to file a claim under the column “Excess Payment of tax,” if any, through form GSTRFD-01.

Issue 2

The supplier for a service contract receives an advance, which got cancelled later on due to the ongoing lockdown situation. The supplier has generated a receipt voucher, and he also has paid GST on such advance received. The question that arises here is, can the supplier claim refund of tax paid, or is he required to adjust his tax liability in his returns?

Clarification-In this situation where the supplier has paid GST on the advance received for an event which later on got cancelled and for which no invoice has been issued in terms of Section 31(2) of the CGST Act, 2017. He is required to follow the advice mentioned below:

• The supplier must issue a refund voucher according to section 31(3)(e) of the CGST Act, to be read with Rule 51 of the CGST Rules.
• The taxpayer can also apply for the refund of GST paid on such advances by filing FORM GST RFD-01 under the category “Refund of excess payment of tax.”

Issue 3

In case the goods supplied by the supplier along with the tax invoice are returned by the recipient. What can the supplier do in this situation, whether to claim a refund of tax paid or is required to adjust his tax liability in his returns?

Clarification– In this type of case where the recipient returns the goods supplied by the supplier and where the tax invoice has been generated. The supplier here needs to issue a credit note in terms of Section 34 of the CGST Act, 2017.

• The supplier here shall declare the details of the credit notes issued in return for the month during which such a credit note had been issued.
• The tax liability must be adjusted in return subject to conditions specified in section 34 of the CGST Act.
• The supplier does not need to file a separate refund claim in such cases.
• However, where there is no output liability against which the credit note can be adjusted, the registered persons may proceed to file a claim under the category “Excess payment of tax,” if any through Form GST RFD-01.

 Issue 4

The Letter of Undertaking (LUT) filed for the purpose of zero-rated supplies according to the provisions of Section 16 of the Integrated Goods and Services Tax (IGST) Act, 2017, to be read with Rule 96A of the CGST Rules which has expired on 31^st March 2020. Here the question arises that whether the registered person can still make a zero-rated supply on such a Letter of Undertaking and claim refund of such IGST?

Clarification-As per Notification No. 37/2017-Central Tax, dated 4^th October, 2017, requires Letter of Undertaking (LUT) to be furnished for a financial year. However, according to notification No. 35/2020 Central Tax dated 3^rd April, 2020 where the requirement under the GST Law for furnishing of any report, document, return, statement, or such other record falls during the time period from 20th March, 2020 to 29th June 2020, has been extended till 30th June 2020. Hence, in terms of Notification No. 35/2020-Central Tax, the time limit for filing of the Letter of Undertaking for the year 2020-21 shall stand extended to 30th June 2020, and the taxpayer can continue the supply without any payment of tax under Letter of Undertaking provided that FORM GST RFD-11^[1] for 2020-21 is filed on or before 30th June 2020. The individual taxpayers may quote the reference no of the LUT for the year 2019-20 in the relevant documents.

Issue 5

While making payment to the recipient, the amount equivalent to one percent was deducted according to the provisions of Section 1 of the Central Goods and Services Tax (CGST) Act, 2017, that is the tax deducted at Source (TDS).  If the date of receipt of the deposit of such payments has been extended through notification number-35/2020-Central tax dated 3^rd April, 2020?

Clarification– According to notification No. 35/2020-Central Tax dated 3^rd April 2020, where the time set for any compliance essential according to sub-section (3) of section 39 and section 51 of the Central Goods and Services Tax (CGST) Act, 2017 falls during the period from 20^th March to 29^th June 2020, the said date has been extended till 30^th June 2020. Accordingly, the due date for filing of the return in FORM GSTR-7 along with the deposit of tax deducted for the mentioned period has also been extended till 30^th June 2020, and no interest under section 50 shall be charged if the deducted tax amount is deposited by 30^th June 2020.

Issue 6

According to section 54 (1) of the CGST Act, a person needs to make an application before the expiry of two years from the relevant date. If, in any particular case, the date for making an application for refund expires as on 31^st March 2020, is it possible for such a person to make an application for a refund before 29^th July, 2020?

Clarification– As specified in notification No. 35/2020-Central Tax dated 3^rd April, 2020, where the timeline set for any compliance required as per sub-section (1) of section 54 of the Central Goods and Services Tax (CGST) Act, 2017 falls during the mentioned period from 20^th March to 29^th June 2020, the said date has been extended till 30^th June 2020. Moreover, the due date for filing an application for refund falling during the mentioned period has also been extended till 30^th June 2020.

Takeaway

A six-point clarification which has been issued for the complete business transactions and tax compliance for the implementation of provisions of GST laws during the COVID-19 led lockdown. These are as follows:

1. Where an invoice has been issued towards advance received for any future service but later on cancelled.
2. Where the receipt voucher has been issued towards any advance received for a future service but which is cancelled later on.
3. The Letter of Undertaking (LUT) reference number which must be used while submitting the export documents.
4. Goods which have been returned to the supplier later towards invoice issued.
5. Extension of the timeline set for depositing Tax Deducted at Source(TDS) under GST
6. Time limit set for making application of GST refund extended.

Hence, for the implementation of the provisions of GST laws, the Government has issued clarification keeping in mind the challenges faced by registered persons.