*GST paid on advance amount is not to be retained by State if contract is cancelled due to breach of contract: Karnataka HC* *Joint Commissioner of Commercial Taxes (Appeals-1) v. Nam Estates (P.) Ltd.* The assessee entered into a contract with a supplier for supply, installation, and commissioning of Gas insulated Sub-stations (GIS)/Conventional Sub-stations and extra-high voltage transmission lines. An advance payment was made by the assessee and the supplier issued a tax invoice including GST. However, the supplier failed to deliver goods and services leading to cancellation of contract and advance was recovered invoking bank guarantee. The assessee filed a refund application seeking refund of GST amount paid along with necessary documents. The department issued a notice indicating that the refund eligibility was not established and a refund rejection order was passed. The assessee filed appeal against the refund rejection order and the Appellate Authority held that the supplier was obliged to issue credit notes for cancelled contract and declare those in their tax return. Therefore, it was concluded that the assessee could not seek a refund of GST paid on advance and appeal was rejected. Thereafter, the assessee filed writ petition against the rejection of refund. The Honorable High Court noted that the refund was sought of the amount paid in contemplation of execution of contract. Admittedly, the contract had been breached and the amount remitted to Exchequer by way of GST component in contemplation of discharge of contract could not have been retained by State when contract failed. Therefore, it was held that the order of rejection of refund was to be set aside and the department was directed to refund entire GST amount.