GST aspects on the Return of Time

GST aspects on the Return of Time-Expired Goods

In this article we will know that if the goods have expired, because of that the goods are being returned by the retailer to the wholesaler or by the wholesaler to the manufacturer, then how will they be treated in GST in this case.

Circular No. 72/46/2018-GST dated 26.10.2018 has clarified such situation. Two options have been provided for this:-

1. Return of time expired goods to be treated as fresh supply
2. Return of time expired goods by issuing Credit Note

1. Return of time expired goods to be treated as fresh supply 

If the goods have been returned by any person (other than the composition taxpayer), then there is an option to treat it as fresh supply and an invoice has to be issued for the same. For the value of the invoice, the price at which it was purchased can be made the base.

The recipient (wholesaler/manufacturer) of the goods will be eligible for ITC by following the condition of section 16.

If the goods are being returned by the composition taxpayer then he will have to issue bill of supply and also pay tax at the applicable rate. Since this goods composition is being returned by the taxpayer, the recipient (wholesaler/manufacturer) of the goods will not be eligible for ITC.

If the goods are being returned by an unregistered person, it can be returned through commercial documents without charging any tax.

1. Return of time expired goods by issuing Credit Note

Another option given in the circular is that in case of return of time expired goods, credit note can be issued by the supplier (wholesaler/manufacturer). Credit note will have to be issued according to the time limit mentioned in section 34 (2). Goods will have to be returned through delivery challan.

The supplier will have to issue the credit note within the time limit specified in section 34 (2). Along with this, tax liability can also be adjusted, if the person making the return has not availed ITC or had availed ITC but has reversed it.

Apart from this, even if the time limit has expired, credit note can be issued, but the liability cannot be adjusted and there is no need to upload this credit note on the common portal.

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