GST refund on cancelled flat, building, shops etc

A situation is possible wherein the buyer of flat/building after entering into an agreement to purchase cancelled the same. The payments made to builder at each instalment contains an amount of GST and hence there arises a situation for refund of the same. In this article we will look at 2 possible scenarios and the mode of collecting GST back from the builder/the government.

Let us consider below 2 scenarios and the mode of claiming GST refund:

1. Agreement entered and payment received during an FY but the same got cancelled before 31 Oct of the subsequent year
2. Agreement entered and payment received during an FY but the same got cancelled after 31 Oct of the subsequent year

In case of Scenario 1: Agreement entered and payment received during an FY but the same got cancelled before 31 Oct of the subsequent year

1. Builder shall issue a credit note and refund the amount of GST to the buyer
2. Post issuance of the credit note, the builder shall declare and adjust the same in GST returns

In case of Scenario 2: Agreement entered and payment received during an FY but the same got cancelled after 31 Oct of the subsequent year

Below process needs to be followed

1. Get a Temporary Registration [TR]. Document required are:
• PAN
• Bank account details
• Aadhaar authentication
2. Pre-requisite for filing an application
• Details of invoices, GST paid, and the amount received after cancellation in Statement 8 to RFD - 01 Application
• Copy of agreement
• Letter of cancellation of agreement from the builder
• Proof of payment received from the builder against cancellation of the agreement
• Certificate from builder stating that GST collected has been paid to Govt. and he has not adjusted it by way of issuance of the credit note. Further, he has not claimed nor will claim any refund of the GST involved in the invoices issued in respect of the cancelled agreement
• Refund amount cannot exceed the tax in proportion to the amount refunded by the builder
3. Filling of application in RFD – 01
• Refund applications should be filed builder-wise. A separate application is required for each builder
4. Sanction of refund in RFD – 06
• After due verification, the proper officer will sanction the refund claim in Form RFD – 06