QUERY - GST ON ADVANCE RETURNED BACK TO CUSTOMER - PRACTICAL APPROACH

GST IMPLICATIONS ON REFUND OF ADVANCES RECEIVED WITHOUT FURTHER SUPPLY

 

ISSUE:

     M/S. ENTITY (REGISTERED WITH GST) has entered into agreement for construction and sale of Flat to a Customer. An amount of Rs.100lacs in FY 2019-20 and Rs.25lacs in FY 2020-21 were received by ENTITY (REGISTERED WITH GST) and same has been disclosed in the GST returns as advances in respective months. Subsequently in the FY 2020-21, the Customer wishes to cancel the said agreement and requesting refund for the said amount. M/s. ENTITY (REGISTERED WITH GST) require clarifications whether GST amount deposited to the government for Rs.5lacs in FY 2019-20 has to be deducted from the refund amount.

 

RULE:

    As per sec.31 (3)(d), a registered person shall, on receipt of advance payment with respect to any supply of goods or services or both, issue a receipt voucher or any other document, containing such particulars as may be prescribed, evidencing receipt of such payment.

    As per Sec.31(3)(e),  where, on receipt of advance payment with respect to any supply of goods or services or both the registered person issues a receipt voucher, but subsequently no supply is made and no tax invoice is issued in pursuance thereof, the said registered person may issue to the person who had made the payment, a refund voucher against such payment.

 

ANALYSIS:

    In the FY 2019-20, M/s. ENTITY (REGISTERED WITH GST) has disclosed the advances in the GST returns and output liability has been paid. As per GST Provisions, Receipt voucher should be given and the details of the document has to be disclosed in GSTR-1 returns.

Since the supply is subsequently cancelled and No Tax invoice is raised, the advance taken can be refunded without deducting GST portion and a refund voucher need to be issued.

In GST Returns, Table 11A of FORM GSTR-1 captures information related to advances received, rate-wise, in the tax period and tax to be paid thereon along with the respective place of supply (POS). Table 11B captures adjustment of tax paid on advance received and reported in earlier tax periods against invoices issued in the current tax period. The details of information relating to advances would be submitted in Table 11A only if the invoice has not been issued in the same tax period in which the advance was received. Whereas adjustments made in respect of advances received during the earlier tax period, but invoices issued in the current tax period would be reflected in Table 11B.

 

In the FY 2020-21, the GST output tax liability already paid can be utilized for other further supplies and to be disclosed in GSTR 11B provided the place of supply (POS) of further supply is same as the supply that has been cancelled.

If the place of supply (POS) is not same, the GST tax Liability advances already paid cannot be adjusted and only Refund application can be made in GST RFD 01.

Since the nature of supply is an immovable property, the place of supply (POS) is the place of such immovable property. Hence in this case, the POS does not change and the GST Tax liability can be adjusted for other further supplies.

CONCLUSION:

1.      M/s. ENTITY (REGISTERED WITH GST) can issue refund voucher and refund the entire advances of Rs.100lacs received in FY 2019-20 and Rs.25lacs received in FY 2020-21 without any deduction.

2.      The GST paid on advances for Rs.5lacs and Rs.1.25lacs can be adjusted for other future supplies.

3.      In GST Returns,

a)      The Refund voucher document to be disclosed.

b)      The Invoice raised for further supply to be adjusted against advances in GSTR 11B.

 

Thipshika
K.Balamurugan.
kbalaca@gmail.com


Disclaimer : The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although requisite caution has been taken to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.