Government to allow GST refund to unregistered homebuyers on cancellation

During the 48th GST council meeting, the Finance Ministry announced its intention to create a provision that would allow unregistered buyers who cancel their purchase of an under construction flat or long-term insurance policy, to claim for a GST refund directly from the government. The council advising the ministry has recommended that such amendments be made to the CGST 2017 rules along with issuance of a circular detailing the procedure for filling out an application for refund for unregistered buyers. If the proposals should be accepted, this could mean a positive step forwards for individuals purchasing under construction homes.

At present the law is not favourable to those that cancel their purchase after a certain time period. For example, if an individual were to purchase an under-construction house for Rs 2 crores on 15th March, he would pay a sum of Rs 10 lacs as GST over and above the purchase price. Should he decide to cancel the deal any time after 30th November of the same calendar year, he will be unable to claim a refund from the builder. This is because for a builder, credit notes can only be issued for supplies made in a financial year up to 30th November for the following financial year. Therefore, if the flat was booked in March but cancelled in December of the same calendar year, issuance of credit notes would not be permitted since the cancellation took place post the 30th November deadline. Under the new proposed amendments to the GST laws, an application for refund can be made within two years from the relevant date, i.e., date of payment of tax or receipt of services.

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Government to allow GST refund to unregistered homebuyers on cancellation

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