Businesses can claim GST refund for cancellation of services, goods contract; aviation sector to benefit

The CBIC has also clarified that exporters can now file letters of undertaking (LUT) till June 30 for full fiscal 2020-21, as against the earlier requirement of filing it by March-end.

The fresh clarifications by CBIC comes amid challenges being faced by taxpayers in adhering to the compliance requirements post the lockdown, which has now been extended till May 3. (Representational)

In a move that would benefit the aviation and hospitality sectors, which have seen mass cancellation of bookings due to the nationwide coronavirus lockdown, the Central Board of Indirect Taxes and Customs (CBIC) has allowed businesses to claim refund of GST in cases where invoice was generated but was subsequently cancelled.

On the issue of advance received by a supplier and the invoice generated for a service contract that got cancelled, the CBIC said, “In cases where there is no output liability against which a credit note can be adjusted, registered persons may proceed to file a claim under excess payment of tax, if any through Form GST RFD-01”.

Similarly, the CBIC said in cases where there is no output liability against which a credit note can be adjusted, the supplier of goods can file a refund claim through Form GST RFD-01.

Further, the CBIC has also clarified that exporters can now file letters of undertaking (LUT) till June 30 for full fiscal 2020-21, as against the earlier requirement of filing it by March end. Under GST, exporters are allowed to ship consignments overseas by just furnishing LUT, without paying integrated tax (iGST).

The civil aviation sector has been hit hard by the COVID-19 pandemic. Earlier this month, Air Deccan announced indefinite suspension of flight operations and asked all employees to go on sabbatical without pay.

With revenues plunging due to the coronavirus crisis, IndiGo has announced a pay cut of up to 25 per cent for its senior employees and Vistara has announced a compulsory leave without pay of up to three days for its senior employees in March.

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SpiceJet has stated that its employees’ salaries would be reduced between 10 to 30 per cent and Air India has announced a 10 per cent cut in allowances for every employee, except cabin crew, for the coming three months.

GoAir has cut salaries of its employees, laid off its expat pilots and introduced leave without pay for employees on a rotational basis.

Rajat Mohan, Senior Partner at AMRG & Associates, said “this clarification would help worst-hit sectors of the business fraternity to claim a tax refund from the government, which would also have a ripple effect in the entire supply chain”, PTI reported.

Earlier this month, the government had retrospectively extended the validity of e-way bill under Goods and Services Tax (GST) regime that would have expired between March 20-April 15 to April 30. The Ministry of Finance had also extended the deadlines for filing GST returns of in view of the coronavirus crisis.