GST Refund claim By Unregistered Person

Circumstances where unregistered person can claim refund of GST paid: –

1. Construction Contracts: –

Where an unregistered buyer who entered in to an agreement with the builder for the supply of the services of construction of flats and have paid the amount of consideration for such services either fully or partially along with the necessary GST applicable. The said contract cancelled either in non­compliance or delay in the construction activity or any other reason and the period to issue the necessary credit note by the supplier has expired.

2. Long term insurance policies: –

Long term insurance policies where the entire premium for the policy is paid upfront along with the applicable GST. The policy is subsequently required to be terminated due to some reasons.

Section 54 of CGST Act 2017: –

The section provides that any person can claim the refund of any tax interest by making the application before the expiry of two years for the relevant date. In case of unregistered person has borne the incidence of tax and has not passed to any other person, the said amount shall be required to be paid to him as refund instead of being required to be credited to Consumer Welfare Fund.

Registration of unregistered person: –

A new functionality has been available on the common portal which allows temporary registration of the unregistered person and apply for the refund.

Process of filing of refund by unregistered person: –

Step 1: – The unregistered person shall obtain temporary registration on the common portal using his PAN. The registration of the unregistered person shall be in the state in which the supplier is registered.

Step 2: – The unregistered person would have to go aadhar authentication.

Step 3: – The unregistered person would provide the bank details in which the applicant seeks to obtain refund.

Form of Refund: –  The application of the refund shall be filed in FORM GST RFD-01 on the common portal under the category of refund for unregistered person.

Maximum of Refund: –  The amount of refund shall not exceed the total amount of tax declared in the invoice issued by the supplier.

Separate application for refund: – Separate application shall be required in respect of the invoices issued by the different suppliers.

Separate Registration: – The applicant shall obtain temporary registration in each of the concerned State / UTs, where the said supplier is registered.

Time period for Filing Refund Application: – The application for the refund shall be made within a period of two years from the relevant date.

Relevant date for filing of refund: –  Relevant date in case of construction contracts or long term insurance policies the relevant date shall be the date of issuance of letter of cancellation of the contract / agreement for the supply of service.

Minimum Amount of Refund:-  Section 54(14) provides that no refund shall be paid to the applicant if the amount of refund is less than Rs 1000/-. Hence, the applicant shall be paid minimum of Rs 1000/- as refund.

Proportionate amount of refund: – Where amount paid pack by the supplier to the un­registered person on cancellation / termination of agreement / contract for the supply of services is less than the amount paid by such unregistered person to the supplier, then only the proportionate amount of tax involved shall be refunded to the unregistered person.

Circular No 188/20/2022-GST, Dated: 27.12.2022