Sales Return

Why goods return and what is legal impact.

A company sold goods to costumer with tell about the quality of goods but after customer will be not satisfied with the quality of may be goods are defective or extra items being ordered.

Than the customer return the goods to the seller. There is some different suction will be arise we are discussion

If the seller and buyer will be register than

If the goods are return by register buyer then the registered seller will issued a credit note to the buyer

The seller must declare the credit note in the GSTR-1 of the month in which it was issued.

For example,

Mr. A sells 10 laptops of Rs 50,000 to M/S XYZ Ltd. on 1st of October and of this 3 are defective and the company will be return this goods in the November month and the seller will be issue a credit note and he will be report in his GSTR-1 of the November. (It will be assumed that seller turnover is more than 1.5 Cr.) 

The following image shows how the sales returns from registered buyers will be reflected in GSTR-1. 

When should the credit note be issued?

The credit note must be issued and declared within the specified time-

By September of the next financial year

OR

Date of furnishing of the relevant annual return,

After that goods return than

Goods returned by a registered taxpayer are treated as ‘Deemed Supply’ in the hands of the original buyer (now returning the goods).

The original buyer levies GST on the Deemed Supply, and any tax previously borne by the buyer can be claimed as an input credit against the GST charged. The buyer is liable for the net amount, thus reducing losses.

The original seller can now claim the GST as an input credit, thus eliminating losses.

If the seller will be register and buyer will be un-register than

It will be considered as deemed supply under the GST Act. Since the goods are returned by the person who is not registered in the GST Act  then in such case tax will be payable under the reverse charge as per section 9(4) of the CGST Act by the person who has originally sold the goods and now receiving it back. The credit of tax paid on reverse charge will be available to such person.

  

Conclusion

If we see both of the case than ultimately refund of tax but both of the case have different methods. And it is better for the ultimate buyer than he will be received back the unutilised tax on such goods.  

Transitional Provisions

These provisions apply on goods sold before GST but returned after GST. When it was sold Excise & VAT was applicable. Now on return GST is applicable.

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