Issue of Tax Invoice Against Material Rejection by Customer instead of Debit Note, Goods and Services Tax - GST

[ACCOUNTS MANAGER]

Hiii...

Few of our customer (OEM) has issued Tax Invoice against material rejection and also shown in their GSTR-1 as sales. And we issued Credit Note for the same and shown in GSTR-1 which is required as per GST.

Question is that they issued Tax Invoice as per GST Rules which is ok but how can they show in GSTR-1 as new sales???... Because same is reflected in our GSTR-2A which is wrong because it is not our purchase.

I want to understand treatment of Customer as why they show this transaction as Sales and not Debit Note??

And if during Audit GST officer raise question of not treating as purchase then how we have to reply??

Kindly Reply,

From,

Devendra

Posts / Replies

[Madhavan iyengar]

The rejection of goods falls under provisions of sec 34(1)

, 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 therecipient a credit note containing such particulars as may be prescribed.

so what you have done is absolutely right, and this is correct procedure as first part mentioned in your query since it is falling in line with the provisions of sec 34(1) you should have intimated your purchaser of same and asked him to accept the credit note, and documented the same and the purchaser should have sent the material back on delivery challan as per rule 55(1)(c) since you have filed your gstr-1 and reduced your output tax and the purchaser will also have to reduce his itc based on the revised GSTR-1 file which will be mirrored in the GSTR-2A.

however this leads us nowhere as compliance will remain an issue regarding itc reversal by purchaser etc.

Hence In terms of circular issued for pharma companies (in which they have mentioned that it can be used in other cases also ie other than pharma as principles remain same which they have mentioned in the ciruclar also) please refer to Circular No. 72/46/2018-GST

The value of the said goods as shown in the invoice on the basis of which the goods were supplied earlier may be taken as the value of such return supply. The wholesaler or manufacturer, as the case may be, who is the recipient of such return supply, shall be eligible to avail Input Tax Credit (hereinafter referred to as “ITC”) of the tax levied on the said return supply subject to the fulfilment of the conditions specified in Section 16 of the CGST Act.

they have tied up the issue of credit note to the reversal of itc by the purchaser so how will supplier ensure itc is reversed by the purchaser

hence they have given alternative method that purchaser can send the returned goods under cover of invoice

[Ganeshan Kalyani]

For GST purpose it is a sale for the customer if pre-GST stock is returned to you. It is a purchase for you . However there is a provision in GSTR-1 for you to mention credit note detail with a drop down to select yes or no for invoice pertaining to pre-gst or post gst. Hence, by giving this facility govt has accepted that credit note shown by purchaser is correct.