GST UPDATE ON TREATMENT OF SALES RETURN IN THE FOLLOWING MONTH

According to section 31, A registered person supplying taxable goods shall, before or at the time of,—
(a) Removal of goods for supply to the recipient, where the supply involves movement of goods; or
(b) Delivery of goods or making available thereof to the recipient, in any other case,
issue a tax invoice showing the description, quantity and value of goods, the tax charged thereon and such other particulars as may be prescribed.

According to legal provisions, at the time of sale, the supplier will issue a tax invoice to the purchaser. In the GSTR1 return, supplier will show details of all outward supplies that had been made during the month. Furthermore, the outward supplies will be autopopulated in the GSTR 2 of the purchaser and the amount of tax will be input tax credit for the purchaser.
Treatment in case of sales return:-
Section 34 of CGST Act 2017 prescribes provisions related to sales returns. The sub-section (1) and (2) to this section reads as follows:-
"(1) Where a tax invoice has been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to exceed the taxable value or tax payable in respect of such supply, 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 the recipient a credit note containing such particulars as may be prescribed.

(2) Any registered person who issues a credit note in relation to a supply of goods or services or both shall declare the details of such credit note in the return for the month during which such credit note has been issued but not later than September following the end of the financial year in which such supply was made, or the date of furnishing of the relevant annual return, whichever is earlier, and the tax liability shall be adjusted in such manner as may be prescribed:

Provided that no reduction in output tax liability of the supplier shall be permitted, if the incidence of tax and interest on such supply has been passed on to any other person."

The analysis of this section makes it clear that where a tax invoice has been issued against any supply, credit note MAY be issued by the supplier in following cases:-
• Taxable value or tax charged in that invoice is found in excess of actual; or
• In case of goods returned by the recipient; or
• Where the supply (both goods or services) is found deficient.

Thus, in any of the above cases, option has been given to the supplier to issue a credit note as the language contained in the above section uses the word "may". Further, if the credit note has been issued by a supplier, he shall declared the details of such credit note in the month of its issuance upon which the tax liability shall be adjusted as may be prescribe. Further, reduction in output tax liability shall not be permitted if the incidence of tax and interest on such supply has been passed on.

Further, section 34(3) & (4) of CGST Act prescribes the conditions related to issuance of debit notes. This section reads as follows:-

"(3) Where a tax invoice has been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to be less than the taxable value or tax payable in respect of such supply, the registered person, who has supplied such goods or services or both, shall issue to the recipient a debit note containing such particulars as may be prescribed.

(4) Any registered person who issues a debit note in relation to a supply of goods or services or both shall declare the details of such debit note in the return for the month during which such debit note has been issued and the tax liability shall be adjusted in such manner as may be prescribed.

Explanation.––For the purposes of this Act, the expression “debit note” shall include a supplementary invoice."

The analysis of above makes it clear that debit note SHALL be issued by the supplier in the cases where the tax amount or taxable value charged on the invoice is found to be less than actual. Further, where the debit note is issued, the supplier shall declare the details of such debit note in the return for the month during which such debit note has been issued.

The analysis of above provisions related to issuance of debit note or credit note makes it clear that in case of sales return, an option has been given to the supplier to issue the credit note. If he issues the credit note, then it is his responsibility to declare the details in his GSTR-1. Further, this language is silent about the fact that in such a case, how the movement of returned goods will take place from buyer to original supplier.
However, since the language of this section uses the word 'may', we can conclude that it is an option lying with the supplier and alternatively, the debit note can also be issued by the recipient while returning the goods to original supplier. But at the same time, the language of section 34(3) is also clear that the debit note "SHALL" be issued by the supplier in case the taxable value or tax charged in the invoice is found in excess of actual value or tax. Thus, there remains the ambiguity in the language contained in this section.
You can reach us at www.capradeepjain.com
and also at our facebook page at
https://www.facebook.com/GSTTODAYBYPRADEEPJAIN/

Comments

GST UPDATE ON TREATMENT OF SALES RETURN IN THE FOLLOWING MONTH

Post a Comment

Query