Suggestions on GST Acts (July 2017) by Institute of Chartered Accountants of India
4. Treatment of Cancellation of bookings under construction
Section 34 of the CGST Act, 2017 provides that where a tax invoice has been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to exceed the taxable value or tax payable in respect of such supply, or where the goods supplied are returned by the recipient, or where goods or services or both supplied are found to be deficient, the registered person, who has supplied such goods or services or both, may issue to the recipient a credit note containing such particulars as may be prescribed.
Issue
There may arise a situation wherein a flat buyer cancels the booking after payment of initial instalments. The said installments would have been tax paid. The flat booking so cancelled will be put up for sale to other buyers. The cancellation of booking is akin to “goods return / deficiency in service”. However, due to peculiar nature of transaction, they, do not fit into broad concept of “goods return / deficiency in service”. Further there is no reduction in the output tax liability of the tax already paid on initial
instalments received.
Suggestion
It is suggested that there be provided a provision for reduction in output tax liability in cases where cancellation is made after initial installments being paid. In such a cases, such fresh transaction also be entitled to stage wise deduction.
Read ICAI Suggestions on GST Act to Govt : July 2017
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