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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value of second hand goods,works contract services & lottery

Special provision related to determination of value of second hand goods

 The taxable value of supply of second hand goods i.e. used goods as such or after such minor processing which does not change the nature of goods shall be the difference between the purchase price and the selling price, provided no input tax credit has been availed on purchase of such goods. However, if the selling price is less than purchase price, that negative value will be ignored.

 Persons who purchase second hand goods after payment of tax to supplier of such goods will be governed by this valuation rule only when they do not avail input tax credit on such input supply. If input tax credit is availed, then such supply will be governed by normal GST valuation

Value of supply of goods repossessed from a defaulting borrower.

 If the defaulting borrower is not a registered person, the purchase value will be purchase price in the hands of such borrower reduced by five percentage points for every quarter or part thereof, between the date of purchase and the date of disposal by the person making such repossession.

However, if the defaulting borrower is registered, the repossessing lender agency will discharge GST at the supply value without any reduction from actual/notional purchase value.

Special provisions related to determination of value of redeemable vouchers/ stamps/ coupons/ tokens

The value of a token, or a voucher, or a coupon, or a stamp (other than postage stamp) which is redeemable against a supply of goods or services or both shall be equal to the money value of the goods or services or both redeemable against such token, voucher, coupon, or stamp.

Valuation of certain works contract services

(i)                  Construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier.

(ii)                In case of supply of service mentioned above, involving transfer of property in land or undivided share of land, as the case may be, the value of supply of service and goods portion in such supply shall be equivalent to the total amount charged for such supply less the value of land or undivided share of land, as the case may be, and the value of land or undivided share of land, as the case may be, in such supply shall be deemed to be one third of the total amount charged for such supply.

“Total amount” means the sum total of,-

(a) Consideration charged for aforesaid service; and

(b) Amount charged for transfer of land or undivided share of land, as the case may be.

Valuation in the case of supply of lottery

 Value of supply of lottery shall be 100/112 of the face value or the price notified in the Official Gazette by the organising State, whichever is higher, in case of lottery run by State Government and 100/128 of the face value or the price notified in the Official Gazette by the organising State, whichever is higher, in case of lottery authorised by State Government.

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Input Service Distributor

  What is ISD (Input Service Distributor)?

Input Service Distributor (ISD) means an office of the supplier of goods or services or both which receives tax invoices towards receipt of input services and issues a prescribed document for the purposes of distributing the credit of central tax (CGST), State tax (SGST)/ Union territory tax (UTGST) or integrated tax (IGST) paid on the said services to a supplier of taxable goods or services or both having same PAN as that of the ISD.

What is the registration process under GST for ISD?,

An ISD will have to compulsorily take a separate registration as such ISD and apply for the same in form GST REG-1. There is no threshold limit for registration for an ISD. The other locations may be registered separately. The concept of ISD under GST is a legacy carried over from the Service Tax Regime. All the existing ISDs will be required to obtain fresh registration under new regime in case they want to operate as an ISD.

Situations where ISD is not applicable

ISD cannot distribute the input tax credit:

Paid on Inputs e.g Raw materials and capital goods e.g Machine purchased

To outsourced manufacturers or service providers.

 Is the ISD required to file return?

Yes, ISD is required to file monthly return by 13th of the following month in form GSTR-6.

Annual return & reverse charge mechanism is required for ISD?

An ISD shall not be required to file Annual return. An ISD cannot accept any invoices on which tax is to be discharged under reverse charge mechanism. This is because the ISD mechanism is only to facilitate distribution of credit of taxes paid.

Concept of distribution of Tax credit by ISD

Let’s take an example to understand this

 The Corporate office of ABC Ltd., is at Bangalore, with its business locations of selling and servicing of goods at Bangalore, Chennai, Mumbai and Kolkata. Software license and maintenance is used at all the locations, but invoice for these services (indicating CGST and SGST) are received at Corporate Office. Since the software is used at all the four locations, the input tax credit of entire services cannot be claimed at Bangalore. The same has to be distributed to all the four locations. For that reason, the Bangalore Corporate office has to act as ISD to distribute the credit.

Whether the excess credit distributed could be recovered from ISD by the department?

No. Excess credit distributed can be recovered along with interest only from the recipient and not ISD. The provisions of section 73 or 74 would be applicable for the recovery of credit.

What are the consequences of credit distributed in contravention of the provisions of the Act?

The credit distributed in contravention of provisions of Act could be recovered from the recipient to which it is distributed along with interest.

 Comprehension between the GST and the earlier tax structure

Point of Difference	Earlier Regime	GST Regime
1.  Who can be Input service distributor?	An office of the manufacturer or producer of final products or provider of output service	An office of the supplier of goods and/or services
2.  Document based on which credit can be distributed	Receives invoices issued under rule 4A of Service Tax Rules, 1994 towards purchase of input services	Receives tax invoices issued by supplier towards receipt of input services
3. How to distribute credit?	By issuing invoice, bill or challan for the purposes of distributing to such manufacturer or producer or provider.	By issuing an ISD invoice  for the purposes of distributing to a supplier of taxable goods and/or services having the same PAN as that of the office referred to above
4. Type of tax credit that can be distributed	The credit of service tax paid on the said services	The credit of CGST (SGST in State Acts) and/or IGST paid on the said services
5. To whom can it be distributed?	To its units and outsourced manufacturers	To supplier having the same PAN. i.e credit cannot be distributed to outsourced manufacturers or service providers.

Credit note & Debit note

Reason of issue of credit note

                                                                                  • The supplier has erroneously declared a value which is more than the actual value of the goods or services provided.

• The supplier has erroneously declared a higher tax rate than what is applicable for the kind of the goods or services or both supplied.

• The quantity received by the recipient is less than what has been declared in the tax invoice.

• The quality of the goods or services or both supplied is not to the satisfaction of the recipient thereby necessitating a partial or total reimbursement on the invoice value.

• Any other similar reasons.

In order to regularize these kinds of situations the supplier is allowed to issue what is called as credit note to the recipient. Once the credit note has been issued, the tax liability of the supplier will reduce.

Format of credit note

There is no prescribed format but credit note issued by a supplier must contain the following particulars, namely:

 (a) name, address and Goods and Services Tax Identification Number of the supplier;

(b) Nature of the document;

(c) a consecutive serial number not exceeding sixteen characters, in one or multiple series, containing alphabets or numerals or special characters hyphen or dash and slash symbolised as “-” and “/” respectively, and any combination thereof, unique for a financial year;

(d) Date of issue;

(e) Name, address and Goods and Services Tax Identification Number or Unique Identity Number, if registered, of the recipient;

(f) Name and address of the recipient and the address of delivery, along with the name of State and its code, if such recipient is un-registered;

(g) Serial number and date of the corresponding tax invoice or, as the case may be, bill of supply;

(h) Value of taxable supply of goods or services, rate of tax and the amount of the tax credited to the recipient; and

(i) Signature or digital signature of the supplier or his authorised representative.

Reason of issue of Debit note

The supplier has erroneously declared a value which is less than the actual value of the goods or services or both provided.

• The supplier has erroneously declared a lower tax rate than what is applicable for the kind of the goods or services or both supplied.

• The quantity received by the recipient is more than what has been declared in the tax invoice.

• Any other similar reasons.

In order to regularize these kinds of situations the supplier is allowed to issue what is called as debit note to the recipient. The debit note also includes supplementary invoice.

Tax liability

The issuance of a debit note or a supplementary invoice creates additional tax liability. The treatment of a debit note or a supplementary invoice would be identical to the treatment of a tax invoice as far as returns and payment are concerned.

Records

The records of the debit note or a supplementary invoice have to be retained until the expiry of seventy two months from the due date of furnishing of annual return for the year pertaining to such accounts and records. Where such accounts and documents are maintained manually, it should be kept at every related place of business mentioned in the certificate of registration and shall be accessible at every related place of business where such accounts and documents are maintained digitally.

Invoice in case of continuous supply of goods

 In case of continuous supply of goods, where successive statements of accounts or successive payments are involved, the invoice shall be issued before or at the time each such statement is issued or, as the case may be, each such payment is received.

Invoice in case of continuous supply of services

In case of continuous supply of services, where:

(a) The due date of payment is as certain able from the contract, the invoice shall be issued on or before the due date of payment.

(b) The due date of payment is not as certain able from the contract, the invoice shall be issued before or at the time when the supplier of service receives the payment.

(c) The payment is linked to the completion of an event, the invoice shall be issued on or before the date of completion of that event.

Issue of invoice in case, where supply of service ceases under a contract before the completion of supply

 In a case where the supply of services ceases under a contract before the completion of the supply, the invoice shall be issued at the time when the supply ceases and such invoice shall be issued to the extent of the supply made before such cessation

 Sale on approval basis

Where the goods being sent or taken on approval for sale or return are removed before the supply takes place, the invoice shall be issued before or at the time of supply or six months from the date of removal, whichever is earlier.

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Invoice or Tax Invoice

A register person need to issue an invoice for the supply of services or goods or both.

Under the GST regime, an “invoice” or “tax invoice” means the tax invoice referred to in section 31 of the CGST Act, 2017. This section mandates issuance of invoice or a bill of supply for every supply of goods or services. It is not necessary that only a person supplying goods or services need to issue invoice. The GST law mandates that any registered person buying goods or services from an unregistered person needs to issue a payment voucher as well as a tax invoice. The type of invoice to be issued depends upon the category of registered person making the supply. An invoice or a bill of supply need not be issued if the value of the supply is less than Rs. 200/- subject to specified conditions.

Supply of exempted goods or services

In case a registered person supplying exempted goods or services or both or paying tax under the provisions of section 10 shall issue, instead of a tax invoice, a bill of supply containing such particulars and in such manner as may be prescribed.

 Provided that the registered person may not issue a bill of supply if the value of the goods or services or both supplied is less than two hundred rupees subject to such conditions and in such manner as may be prescribed;

Details need to be show in the GST invoice

There is no format prescribed for an invoice, however, Invoice rules makes it mandatory for an invoice to have following fields (only applicable field are to be filled):

(a) Name, address and GSTIN of the supplier;

(b) A consecutive serial number, in one or multiple series

 (c) Date of its issue;

(d) Name, address and GSTIN or UIN, if registered, of the recipient;

(e) name and address of the recipient and the address of delivery, along with the name of State and its code, if such recipient is unregistered and where the value of taxable supply is fifty thousand rupees or more;

 (f) HSN code of goods or Accounting Code of services;

 (g) Description of goods or services;

(h) Quantity in case of goods and unit or Unique Quantity Code thereof;

(i) Total value of supply of goods or services or both;

(j) Taxable value of supply of goods or services or both taking into account discount or abatement, if any;

(k) Rate of tax (central tax, State tax, integrated tax, Union territory tax or cess);

(l) Amount of tax charged in respect of taxable goods or services (central tax, State tax, integrated tax, Union territory tax or cess);

(m) Place of supply along with the name of State, in case of a supply in the course of inter-State trade or commerce;

(n) Address of delivery where the same is different from the place of supply;

(o) Whether the tax is payable on reverse charge basis; and

(p) Signature or digital signature of the supplier or his authorized representative

                                      Time Limit of issuing the GST Invoice

Supply of Goods	Supply of Services
The tax invoice must be issued before or at the time of -            Removal of goods, where supply involves movement of goods           Delivery of goods to the recipient, where supply does not require movement of goods            Issue of account statement/ payment, where there is continuous supply	The tax invoice must be issued within -         30 days from the date of supply of the service            45 days from the date of supply of the service, where the supplier is an insurer or banking company or a financial institution

Copies of the GST Invoice required

Supply of Goods	Supply of Services
Original invoice: The original invoice is issued to the receiver, and is marked as 'Original for recipient'.	Original Invoice: The original copy of the invoice is to be given to receiver, and is marked as 'Original for recipient'.
Duplicate copy: The duplicate copy is issued to the transporter, and is marked as 'Duplicate for transporter'. This is not required if the supplier has obtained an invoice reference number. The Invoice reference number is given to a supplier when he uploads a tax invoice issued by him in the GST portal. It is valid for 30 days from the date of upload of invoice. Triplicate copy: This copy is retained by the supplier, and is marked as 'Triplicate for supplier'.	Duplicate Copy: The duplicate copy is for the supplier, and is marked as 'Duplicate for supplier'.

Invoice in case of continuous supply of goods

 In case of continuous supply of goods, where successive statements of accounts or successive payments are involved, the invoice shall be issued before or at the time each such statement is issued or, as the case may be, each such payment is received.

 Invoice in case of continuous supply of services

 In case of continuous supply of services, where,

 (a) The due date of payment is ascertainable from the contract; the invoice shall be issued on or before the due date of payment;

(b) The due date of payment is not ascertainable from the contract; the invoice shall be issued before or at the time when the supplier of service receives the payment;

(c) The payment is linked to the completion of an event; the invoice shall be issued on or before the date of completion of that event.

In the next post we are discussed about the Credit note, Debit note, Revised Invoice and Receipt Voucher/ Refund voucher on receipt of advance payment

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Effective tax rate on complex, building, flat etc.

Press Information Bureau
Government of India
Ministry of Finance
08-December-2018 17:16 IST

Effective tax rate on complex, building, flat etc.

It is brought to the notice of buyers of constructed property that there is no GST on sale of complex/ building and ready to move-in flats where sale takes place after issue of completion certificate by the competent authority. GST is applicable on sale of under construction property or ready to move-in flats where completion certificate has not been issued at the time of sale.

   Effective rate of tax and credit available to the builders for payment of tax are summarized in the table for pre-GST and GST regime.

Period	Output Tax Rate	Input Tax Credit details		Effective Rate of Tax
Pre- GST	Service Tax: 4.5% VAT: 1% to 5% (composition scheme)	Central Excise on most of the construction materials: 12.5% VAT: 12.5 to 14.5% Entry Tax: Yes	No input tax credit (ITC) of VAT and Central Excise duty paid on inputs was available to the builder for payment of output tax, hence it got embedded in the value of properties. Considering that goods constitute approximately 45% of the value, embedded ITC was approximately 10- 12%.	Effective pre-GST tax incidence: 15- 18%
GST	Affordable housing segment: 8%, Other segment: 12% after 1/3rdabatement of value of land	Major construction materials, capital goods and input services used for construction of flats, houses, etc. attract GST of 18% or more.	ITC available and weighted average of ITC incidence is approximately 8 to10%.	Effective GST incidence, for affordable segment and for other segment has not increased as compared to pre- GST regime.

   

Housing projects in the affordable segment such as Jawaharlal Nehru National Urban Renewal Mission, Rajiv Awas Yojana, Pradhan Mantri Awas Yojana or any other housing scheme of State Government etc., attract GST of 8%. For such projects, after offsetting input tax credit, the builder or developer in most cases will not be required to pay GST in cash as the builder would have enough ITC in his books of account to pay the output GST.

  For projects other than affordable segment, it is expected that the cost of the complex/ buildings/ flats would not have gone up due to implementation of GST. Builders are also required to pass on the benefits of lower tax burden to the buyers of property by way of reduced prices/ installments, where effective tax rate has been down.

Extension of Due Date of annual Return

More about annual return

https://taxwillingin.blogspot.com/2018/11/annual-retrurn-gstr-9.html

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