Check the supplier’s credit-note route first
Circular 188/20/2022-GST dated 27 December 2022 addresses unregistered recipients who bore GST on cancelled flat/building construction-service contracts or terminated long-term insurance policies after the supplier’s section 34 credit-note period had expired. Its special RFD-01 route is not a universal refund mechanism for every dissatisfied buyer. At the date of cancellation or termination, first establish whether the supplier could still issue the relevant GST credit note and return the tax. Paragraph 4.4 reserves this recipient claim route for cases where that period had already expired.
Read the applicable text: CBIC Circular 188/20/2022-GST: paragraphs 4–7.1 Notification 26/2022-Central Tax: rule 89(2)(ka), (kb), (m) and Statement 8 India Code: CGST Act, section 54.
Build the statutory evidence before obtaining temporary registration
Section 54 permits refund applications subject to eligibility and limitation. Under section 54(8)(e), refund can be paid to the applicant who bore the tax incidence and did not pass it to another person; preserve evidence of that requirement as well as the supplier certificate. Under rule 89(2)(ka), inserted by Notification 26/2022-Central Tax dated 26 December 2022, assemble invoice particulars and copies, payment proof, the agreement, the supplier’s cancellation/termination letter and evidence of amounts paid back. Under clause (kb), obtain the supplier’s certificate confirming payment of the invoice tax, no adjustment of that tax through a credit note, and no refund claimed or to be claimed by the supplier for that amount. A buyer’s assertion that GST was retained does not replace this certificate. The additional proviso to rule 89(2)(m) removes the specified professional certificate requirement for an unregistered person who bore the tax; it does not remove the supplier certificate.
Use the supplier’s State and the claimant’s identity
Paragraph 4.1 of the circular prescribes PAN-based temporary registration in the State/UT of the supplier whose invoice is concerned, Aadhaar authentication under rule 10B and a bank account in the applicant’s name obtained on that PAN. Temporary registration is an access mechanism for this refund; it is not evidence that the applicant carried on a taxable business. Keep the claimant identity consistent across the contract, invoice, payment evidence and bank account. Resolve joint-buyer or name discrepancies through supporting records rather than silently changing the claimant.
Separate applications by supplier
File FORM GST RFD-01 under the category Refund for unregistered person, with Statement 8 in PDF and the required evidence. Paragraph 4.3 requires separate applications for different suppliers. Where their registrations are in different States/UTs, obtain temporary registration in each relevant State/UT. A common PAN of a supplier group or a buyer’s single consolidated settlement spreadsheet does not justify one undifferentiated application. Reconcile each claim to the invoice-issuing GSTIN and the tax actually borne.
Calculate the refundable portion, not the invoice total
Paragraph 4.2 caps the claim at tax on the relevant invoices. Paragraph 7.1 restricts refund proportionately where the supplier returns less than the amount paid on cancellation or termination. Establish which service consideration was refunded and which was retained, with the related invoice tax; do not claim all historical tax simply because the contract ended. Separate damages, cancellation charges, supplied services and other settlement items for their own treatment. The examples assume the refunded consideration and its associated invoice tax are clearly identified; stated tax amounts are hypothetical invoice facts, not a declaration of the GST rate applicable to every property or policy.
Control limitation and the sanction trail
For the long-term arrangements described in paragraph 5, cancelled before completion with no receipt of the service to the unsupplied extent, the circular treats the supplier’s cancellation-letter issue date as the relevant date. Section 54(1) requires the application before expiry of two years from the relevant date. Use the actual supplier letter, not merely the buyer’s earlier cancellation request or later settlement date. Paragraph 6 says no claim below ₹1,000. A claim of exactly ₹1,000 is not below that numerical bar, but still needs full eligibility. The officer scrutinises completeness and eligibility and issues RFD-06 with a speaking order under paragraph 7; obtaining a temporary number does not guarantee sanction.
Six worked illustrations
All facts and amounts are fictional. Calculations illustrate the stated assumptions, not a predetermined legal outcome.
Illustrative example 1: Full cancellation with tax retained
A fictional invoice records construction-service consideration ₹4,00,000 and GST ₹20,000, both paid by an unregistered buyer. After the credit-note window has expired, the supplier cancels the unsupplied contract and returns the entire ₹4,00,000 consideration, retaining GST. Subject to certificate, limitation and all other evidence, the tax working is ₹20,000 × 100% = ₹20,000, not a refund of the ₹4,20,000 gross payment.
Illustrative example 2: Only part of consideration returned
The buyer paid ₹6,00,000 service consideration plus invoiced tax of ₹30,000. On termination, the supplier returns ₹4,50,000 of that consideration and confirms the associated proportion. The returned proportion is ₹4,50,000 ÷ ₹6,00,000 = 75%; the paragraph 7.1 tax working is ₹30,000 × 75% = ₹22,500. The remaining ₹7,500 of invoice tax does not enter this refund merely because the contract ended.
Illustrative example 3: Two suppliers need separate files
Two eligible cancelled contracts with supplier A have supported tax claims ₹18,000 and ₹9,000. A third with supplier B has ₹6,000. The total control is ₹33,000, but supplier A’s application reconciles ₹27,000 and supplier B’s ₹6,000 separately. If A and B are registered in different States, the temporary-registration files also follow those respective States.
Illustrative example 4: Minimum amount test
One otherwise eligible application works out to ₹990: the circular’s below-₹1,000 restriction prevents the claim. A separate otherwise eligible application works out to ₹1,000 and is not below that threshold. The ₹10 difference changes the threshold result, not the need for a valid claim. Do not combine unrelated suppliers merely to reach the minimum.
Illustrative example 5: Cancellation date versus settlement date
The supplier issues the qualifying cancellation letter on 10 October 2024 and settles the money on 15 January 2025, 97 days later. The two-year anniversary of the relevant cancellation-letter date is 10 October 2026; use a filing control before that expiry, such as 9 October 2026, rather than counting from January 2025. This illustration assumes the circular’s unsupplied long-term-service facts and no independent limitation relief.
Illustrative example 6: Prevent a duplicate tax reimbursement
Invoices contain ₹12,000 of tax associated with fully refunded service consideration. Settlement evidence shows the supplier has already returned ₹2,000 of that tax to the buyer without claiming a GST adjustment or refund. The buyer’s remaining unreimbursed tax control is ₹12,000 − ₹2,000 = ₹10,000. This is an upper control amount before the officer confirms the proportionate refund under paragraph 7.1 and the tax incidence; it is not a standalone sanction formula. Reconcile the certificate and actual incidence before filing; claiming ₹12,000 again would recover ₹2,000 twice. This is a double-recovery check, not an alternative to the circular’s eligibility tests.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Identify the eligible service arrangement | Construction agreement or long-term policy and cancellation facts. |
| 2 | Check the section 34 position at cancellation | Invoice year, credit-note cut-off and annual-return evidence where relevant. |
| 3 | Establish the supplier-letter relevant date | Dated supplier cancellation/termination letter. |
| 4 | Reconcile original payments | Invoice-wise consideration, tax and bank proofs. |
| 5 | Reconcile settlement components | Refunded service value, retained value and tax already reimbursed. |
| 6 | Obtain the clause (kb) certificate | Supplier tax payment, no credit-note adjustment and no duplicate refund confirmations. |
| 7 | Set up the correct temporary registration | PAN, supplier State/UT, authentication and claimant bank details. |
| 8 | Prepare supplier-specific applications | GSTIN-wise Statement 8 and RFD-01 evidence bundle. |
| 9 | Validate amount and limitation | Invoice cap, proportionate tax, ₹1,000 test and two-year control. |
| 10 | Track disposal and receipt | ARN, correspondence, RFD-06 speaking order and bank-credit reconciliation. |
Sixteen practitioner FAQs
1. Can any unregistered purchaser use this circular?
It addresses the specified cancelled construction-service and terminated long-term-insurance arrangements; do not extend it automatically to all purchases.
2. What if the supplier’s credit-note period is still open?
Paragraph 4.4 directs attention to the supplier issuing the credit note and returning tax; this special recipient route is confined to expiry cases.
3. Is the buyer’s cancellation request the relevant date?
For paragraph 5’s described cases, the supplier’s cancellation-letter issue date is used. Preserve the actual letter.
4. Does the settlement date restart the two-year period?
Not under the circular’s stated relevant-date rule.
5. Which State is used for temporary registration?
The supplier’s State/UT for the invoice concerned, rather than automatically the buyer’s home State.
6. Can two suppliers be put in one application?
The circular requires separate applications for invoices issued by different suppliers.
7. What if the suppliers are in different States?
The claimant obtains temporary registration in each relevant supplier State/UT.
8. Which refund form and statement are prescribed?
FORM GST RFD-01 under Refund for unregistered person, with Statement 8 and required documents.
9. Is Statement 8 alone sufficient?
No. Invoice, payment, contract, cancellation, settlement and supplier-certificate evidence must support it.
10. What must the supplier certify?
Tax payment, no credit-note tax adjustment and no refund claimed or to be claimed by that supplier for the amount.
11. Is a CA/CMA certificate always compulsory above ₹2 lakh?
The additional proviso to rule 89(2)(m) exempts the stated unregistered tax-bearer case from that certificate; the supplier certificate remains necessary.
12. Can all invoice GST be claimed after a partial settlement?
Paragraph 7.1 limits the claim proportionately. Reconcile the returned consideration and related tax.
13. Is exactly ₹1,000 prohibited?
The circular prohibits amounts less than ₹1,000, so equality is outside that numerical bar, subject to other conditions.
14. Can the claimant use someone else’s bank account?
Paragraph 4.1 requires an account in the applicant’s name obtained on that PAN.
15. Does a cancellation charge automatically form refundable service consideration?
No. Identify the settlement components and assess their treatment; do not assume all deductions have the same character.
16. Does filing assure payment?
No. The proper officer examines completeness and eligibility, with RFD-06 and a detailed speaking order forming the disposal trail.
Official sources
CBIC Circular 188/20/2022-GST: paragraphs 4–7.1 Notification 26/2022-Central Tax: rule 89(2)(ka), (kb), (m) and Statement 8 India Code: CGST Act, section 54