Un-registered dealer means a person who is not required to register under the GST Laws. Section 23 of the Goods and Services Tax Act, 2017 (‘Act’ for short) provides that the following persons shall not be liable to registration,-
- any person engaged exclusively in the business of supplying goods or services or both that are not liable to tax or wholly exempt from tax under this Act or under the Integrated Goods and Services Tax Act;
- an agriculturist, to the extent of supply of produce out of cultivation of land.
The Government may, on the recommendations of the Council, by notification, specify the category of persons who may be exempted from obtaining registration under this Act.
Assessment on unregistered person
Section 63 of the Act provides that notwithstanding anything to the contrary contained in section 73 or section 74, where a taxable person fails to obtain registration even though liable to do so or whose registration has been cancelled under sub-section (2) of section 29 but who was liable to pay tax, the proper officer may proceed to assess the tax liability of such taxable person to the best of his judgment for the relevant tax periods and issue an assessment order within a period of five years from the date specified under section 44 for furnishing of the annual return for the financial year to which the tax not paid relates.
Since they are not registering under GST Act they are not supposed to levy tax and remit the same and also to file returns. If so there is no question of getting refund by the unregistered person. In certain circumstances the unregistered person may get the refund of tax paid by him.
An unregistered person may file an application before the Authority for Advance Ruling to get an advance ruling. An unregistered person creates a challan and after making payment, need to take the print of that challan (along with other documents) to State Advance Ruling Authority Office. The login facility is not provided to Unregistered Taxpayer. Unregistered applicant accesses the GST Portal and creates a Temporary User ID on GST Portal. Temporary id may be created by an unregistered person for filing the application for advance ruling or to get the refund.
Events for getting refund
The Central Board of Indirect Taxes issued one circular in Circular No. 188/20/2022, dated 27.12.2022 in which the Board indicates the procedure for an unregistered person to get refund. The said circular indicated two situations when an unregistered person may claim refund-
- The unregistered buyers may enter into an agreement/contract with a builder for supply of services of construction of flats/ building, etc., and may pay the amount towards consideration for such service, either fully or partially, along with applicable tax. The said contract/agreement may be cancelled subsequently due to non-completion or delay in construction activity in time or any other reasons. In a number of such cases, the period for issuance of credit note on account of such cancellation of service under the provisions of section 34 of the Act may already have got expired by that time. In such cases. In this case the supplier may refund the amount to the buyer, after deducting the amount of tax collected by him from the buyer.
- In cases of long-term insurance policies where premium for the entire period of term of policy is paid upfront along with applicable GST and the policy is subsequently required to be terminated prematurely due to some reasons. In some cases, the time period for issuing credit note under the provisions of section 34 of the Act may have already expired and therefore, the insurance companies may refund only the proportionate premium net off GST.
Facility for getting refund
Representations have been received requesting for providing a facility to such unregistered buyers/ recipients for claiming refund of amount of tax borne by them in the event of cancellation of the contract/agreement for supply of services of construction of flat/ building or on termination of long-term insurance policy.
Refund under Section 54
Section 54 provides the procedure for getting refund by a registered person. Section 54(1) provides that any person claiming refund of any tax and interest, if any, paid on such tax or any other amount paid by him, may make an application before the expiry of two years from the relevant date in Form GST RFD-01. The application shall be accompanied by such documentary evidence as may be prescribed to establish that a refund is due to the applicant. Clause (e) of sub-section (8) of section 54 of the CGST Act, in cases where the unregistered person has borne the incidence of tax and not passed on the same to any other person, the said refund shall be paid to him instead of being credited to Consumer Welfare Fund.
In order to enable such unregistered person to file application for refund under Section 54, in cases where the contract/agreement for supply of services of construction of flat/ building has been cancelled or where long-term insurance policy has been terminated, a new functionality has been made available on the common portal which allows unregistered persons to take a temporary registration and apply for refund under the category ‘Refund for Unregistered person’. The application under sub-rule (1) shall be accompanied by-
- Any of the documentary evidences in Annexure 1 in Form GST RFD-01, as applicable, to establish that a refund is due to the applicant.
- A statement containing the details of invoices viz. number, date, value, tax paid and details of payment, in respect of which refund is being claimed along with copy of such invoices, proof of making such payment to the supplier, the copy of agreement or registered agreement or contract, as applicable, entered with the supplier for supply of service, the letter issued by the supplier for cancellation or termination of agreement or contract for supply of service, details of payment received from the supplier against cancellation or termination of such agreement along with proof thereof, in a case where the refund is claimed by an unregistered person where the agreement or contract for supply of service has been cancelled or terminated;
- a certificate issued by the supplier to the effect that he has paid tax in respect of the invoices on which refund is being claimed by the applicant; that he has not adjusted the tax amount involved in these invoices against his tax liability by issuing credit note; and also, that he has not claimed and will not claim refund of the amount of tax involved in respect of these invoices, in a case where the refund is claimed by an unregistered person where the agreement or contract for supply of service has been cancelled or terminated.
- A Certificate in Annexure 2 of Form GST RFD-01 issued by a chartered accountant or a cost accountant to the effect that the incidence of tax, interest or any other amount claimed as refund has not been passed on to any other person, in a case where the amount of refund claimed exceeds Rs.2 lakhs. This certificate is not required to be furnished in respect of cases covered under clause (a) or clause (b) or clause (c) or clause (d) or clause (f) of subsection (8) of section 54. This certificate is not required to be filed by unregistered person.
The Board, vide the circular above, gave clarifications in getting refund by unregistered persons-
- The unregistered person, who wants to file an application for refund in cases where the contract/agreement for supply of services of construction of flat/ building has been cancelled or where long-term insurance policy has been terminated, shall obtain a temporary registration on the common portal using his Permanent Account Number (‘PAN’ for short). While doing so, the unregistered person shall select the same state/UT where his/her supplier, in respect of whose invoice refund is to be claimed, is registered.
- The unregistered person would be required to undergo Aadhaar authentication in terms of provisions of rule 10B of the CGST Rules.
- The unregistered person would be required to enter his bank account details in which he seeks to obtain the refund of the amount claimed. The applicant shall provide the details of the bank account which is in his name and has been obtained on his PAN.
- The refund amount claimed shall not exceed the total amount of tax declared on the invoices in respect of which refund is being claimed.
- The applicant shall also upload any other document(s) to support his claim that he has paid and borne the incidence of tax and that the said amount is refundable to him.
- Separate applications for refund have to be filed in respect of invoices issued by different suppliers.
- where the suppliers, in respect of whose invoices refund is to be claimed, are registered in different States/UTs, the applicant shall obtain temporary registration in the each of the concerned States/UTs where the said supplier are registered.
- the refund claim can be filed by the unregistered persons only in those cases where at the time of cancellation/termination of agreement/contract for supply of services, the time period for issuance of credit note under section 34 of the Act has already expired.
- no refund shall be claimed if the amount is less than Rs.1,000/-.
- The proper officer shall process the refund claim filed by the unregistered person in a manner similar to other RFD-01 claims.
- The proper officer shall scrutinize the application with respect to completeness and eligibility of the refund claim to his satisfaction and issue the refund sanction order in Form GST RFD-06 accordingly.
- The proper officer shall also upload a detailed speaking order along with the refund sanction order in Form GST RFD-06.
- In cases where the amount paid back by the supplier to the unregistered person on cancellation/termination of agreement/contract for supply of services is less than amount paid by such unregistered person to the supplier, only the proportionate amount of tax involved in such amount paid back shall be refunded to the unregistered person.