23 September 2017
if an unregistered purchaser has given advance against purchase of gold to registered dealer jeweller by debit card but unregistered purchaser afterwards cancelled the order then is the registered dealer has right to collect gst from unregistered purchaser on goods return?? please guide..
26 July 2024
In the scenario where an unregistered purchaser has given an advance payment to a registered dealer for gold and subsequently cancels the order, the registered dealer needs to handle the situation in compliance with GST regulations. Here’s how to approach it:
### **1. GST Implications on Goods Return**
**a. Advance Payment and Cancellation**
1. **Advance Payment**: When an advance is made for the purchase of goods, GST is generally not applicable at the time of advance. GST becomes applicable at the time of supply, which is when the goods are delivered or when the invoice is issued.
2. **Order Cancellation**: If the order is canceled before the supply is made and the goods are not delivered, GST is not applicable on the return of goods. In this case, the dealer does not have the right to collect GST on the returned goods because there was no supply.
**b. Handling the Advance Payment**
1. **Refunding the Advance**: Since the order was canceled, the registered dealer should refund the advance payment made by the unregistered purchaser.
2. **Issuing a Credit Note**: - **Credit Note**: If a formal transaction was recorded and the advance payment was treated as a partial payment against a purchase order, issuing a credit note to reflect the cancellation and return of the advance may be appropriate. This credit note should detail the cancellation and refund but does not involve GST since no supply occurred. - **Document the Refund**: Ensure that the refund of the advance payment is documented properly, showing that it is a cancellation and not a supply.
**c. GST on Supply**
1. **No GST on Cancellation**: Since no goods were supplied due to the cancellation, no GST needs to be collected or refunded on the canceled transaction. GST is applicable only when there is a supply of goods or services.
2. **Input Tax Credit (ITC)**: If the dealer had claimed ITC on the advance payment (in cases where GST was initially considered), they should adjust their records accordingly, but this typically involves situations where GST was actually paid on the advance.
### **2. Practical Steps for the Dealer**
1. **Refund the Advance**: - Process the refund to the unregistered purchaser for the advance amount. Ensure that the refund transaction is properly recorded.
2. **Issue a Credit Note**: - Issue a credit note (if applicable) to formally document the cancellation of the order. The credit note should state that the advance is being refunded due to order cancellation and should not include GST since no goods were supplied.
3. **Update Records**: - Update your accounting and GST records to reflect the refund and cancellation. Ensure that no GST liability is mistakenly created for a non-supply scenario.
4. **Documentation**: - Maintain proper documentation of the advance payment, cancellation, refund, and credit note to ensure compliance and for future reference in case of audits.
### **Summary**
- **No GST on Return**: Since no supply was made (order canceled), GST is not applicable on the return of goods. - **Refund Advance**: Refund the advance payment to the unregistered purchaser. - **Credit Note**: Issue a credit note if needed to document the cancellation and refund but without GST implications. - **Compliance**: Ensure proper documentation and update records to reflect the cancellation and refund accurately.
For specific issues or complex scenarios, consulting a GST expert or tax advisor may provide additional guidance tailored to your situation.
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