In the old taxation scenario, the goods are eligible to be reduced from the overall turnover of sales, on the condition that the goods are returned within the mentioned timeline. The rebate in tax and its eligibility varies from one state to other. It takes 6 months from the actual date of sale.
GST (Goods and Services Tax) is a major taxation reform that has been implemented from July 1, 2017. As the Supply is a taxable event, therefore, it is necessary for businesses to understand the applicability of tax on goods and services in GST regime.
Read More: Determine the Supply of Goods and Supply of Services in GST
We have divided the topic into two parts:
1.Return of taxable goods
| SCENARIO | EXPLANATION | EXAMPLE | TAXABILITY |
|---|---|---|---|
| Returned by Registered Assessee | The return initiated by a registered assessee will be taken as supply, and the GST will be applicable. On the purchase date of the goods, the tax paid by the recipient is termed as input tax credit and it will be eventually allowed to be carried forward as input tax credit to GST. Under GST, the person returning the good must charge GST and the GSt paid on the sales returns will be allowed as input tax credit to the seller. | Ram Automobiles is a registered dealer in spare parts, located in Mumbai. On 16th June, 2017, Ram Automobiles sold 35 Nos of spare parts worth Rs. 1, 00,000, with VAT @ 14.5%, to Rakesh Auto Parts, who is also a registered dealer in Mumbai On 6th July, 2017, Rakesh Auto Parts returned 20 Nos of the spare parts to Ram Automobiles. | The return of goods by Rakesh Auto Parts will be considered as supply, and will attract GST. Hence, on making the purchase return, Rakesh Auto Parts will charge a GST of 18 %. |
| Returned by an Unregistered Assessee | In case the person is unregistered then the seller will be eligible for the refund of the tax paid in the current tax regime. The refund to be claimed will be based on the following conditions mentioned below:
1. The date of sale of the goods returned should not be more than 6 months prior to the date of implementation of GST. 2. The return of goods should be within a period of 6 months from the date of implementation of GST. |
Ram Automobiles is a registered dealer in spare parts located in Mumbai. On 26th June, 2017, Ram Automobiles sold a spare part worth Rs. 20,000, with VAT @ 14.5%, to a customer Mr. Sharma.
On 3nd July, 2017, Mr. Sharma returned the spare part to Ram Automobiles. |
Ram Automobiles will be eligible for a refund of Rs. 1,450. This is because, the sale period is within 6 months prior to the implementation of GST, and the return of the spare part is within 6 months from the date of implementation of GST. |
2.Return of exempted goods:
In case the exempted goods are sold prior to GST, but these goods are taxable and are returned on or after the GST Roll-out.
| SCENARIO | EXPLANATION | EXAMPLE | TAXABILITY |
|---|---|---|---|
| Returned by Registered Taxable Person |
On exempted goods, which are sold under the present taxation scheme and are returned after the GST implementation, no tax will be liable. This is applicable under following conditions:
1. The date of sale of the goods returned should exceed period of 6 months prior to the date of GST rollout. 2. The return of goods should be done within a period of 6 months from the date of GST implementation. |
1. On 16th June, 2017, Ram Automobiles sold a goods worth Rs. 1,00,000, which is exempt from VAT.On 20th July, 2017, goods were returned to Ram Automobiles
2. On 16th June, 2017, Ram Automobiles sold goods worth Rs. 1,00,000, which is exempt from VAT.On 22th January, 2018, spare part were returned to Ram Automobiles.
|
1. On return of goods, no tax is payable. This is because, the sale period is within 6 months prior to the implementation of GST, and the return of goods is within 6 months from the date of implementation of GST.
2. On return of goods, tax is payable. This is because, the return of goods is not within 6 months from the date of implementation of GST. |
| Taxable goods are returned by an Unregistered Person | The sold out Goods which are treated as exempt under current regime and are returned by unregistered person in GST, no tax is on such return. |
On 26th June, 2017, Ram Automobiles sold a goods worth Rs. 20,000, to a customer Mr. Sharma. This was exempt from VAT.
On 2nd July, 2017, Mr. Sharma returned goods to Ram Automobiles. |
No tax is payable on such returns. |
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If the sales made on 02.01.2017 to a registered dealer and the same goods return with return benefit can be done upto 31..12.2017 or upto 30.09.2018….?!!!!
If the sales made on 15.11.2016 to a registered dealer and the same goods returned on 30.07.2017 (in VAT/CST act its not allowed becoz its beyond 180 days time limitation) then what will be the scenario in GST…!!!
GST transitional provision said upto 30.09.2018 can take the goods return benefit …!!!
request you to please advise.