Goods and Services Tax (GST) is usually paid on advances received for goods or services. But what happens if the supplier fails to fulfill the contract? Can the taxpayer claim a refund on the GST paid without a credit note? The answer is yes, and here’s how it works.
Understanding the Issue
When businesses receive advance payments, they must pay GST on the amount, even before delivering goods or services. However, if the supplier fails to fulfill the contract, the recipient may cancel the order and seek a refund of the advance paid. But what about the GST already paid?
Normally, a credit note is issued by the supplier, which allows the buyer to adjust GST. However, in cases where a supplier refuses or is unable to issue a credit note, the taxpayer can still claim a refund under GST law.
Key Rule: Refund Without a Credit Note
Under Section 54 of the CGST Act, a taxpayer can apply for a refund of GST paid if the transaction is not completed due to contract breaches. The refund can be claimed under the category of "excess tax paid."
Conditions for Refund
- Advance Payment Was Made & GST Was Paid – The taxpayer must have proof of payment and the corresponding GST paid.
- Breach of Contract by the Supplier – The supplier must have failed to deliver goods or services as per the agreement.
- No Credit Note Issued – If the supplier does not issue a credit note, the recipient can apply for a GST refund.
- Proof of Contract Cancellation – The taxpayer must show proof of cancellation, such as emails, cancellation letters, or legal notices.
Steps to Claim a Refund
- Login to the GST Portal – Go to www.gst.gov.in.
- File Form RFD-01 – Select “Excess Tax Paid” as the reason for the refund.
- Attach Supporting Documents – Include payment proof, cancellation details, and correspondence with the supplier.
- Submit Application & Track Status – After submission, monitor the status of your refund request.
Conclusion:
Taxpayers are not obligated to bear the loss of GST if a supplier fails to fulfill the contract. Even if a credit note is not issued, a refund can be claimed through the GST portal. Ensuring proper documentation and following the process can help businesses recover their tax amounts smoothly.
If you’ve faced such a situation, It’s time to reclaim your rightful GST refund!