Expired goods treatments

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

05 June 2018 Dear Experts,

As per supplier/ manufacturar policy, wholesaler shall accept expired medicine anywhere whole d India..... Either or not sale by him, . And wholesaler issue credit not with mentioned GST amount. And after than he returned such goods to d supplier/manufacturer as a purchase return...

My question is can he do this bqz he not purchase such good but accept as a sales return and purchase return.....

How can he avail ITC .... Please share accounting treatment....

Expert : Anonymous

Expert : Anonymous (Expert)

05 June 2018 Treatment in the hand of buyer - he will receive a credit not from his supplier and accordingly he has to reverse the ITC earlier availed Treatment in the hand of supplier - he will issue a credit note and his output tax liability shall stand reduce Equal to the amount of credit note. meaning thereby no question arise of talking ITC. further, the treatment shall remain same if the supplier subsequently return those expired to manufacturer.

Querist : Anonymous

Querist : Anonymous (Querist)

06 June 2018 but Sir, Supplier (Mr. A) not sale such goods , how can he issue credit note.
Manufacturer or other supplier (Mr. B) sale such good to retailer (Mr. C).
Mr C return such goods to Mr. A.

Here Mr. A issue credit note to Mr. C. Mr A not sale such good to Mr. C.
Also Mr. A returned such goods to Mr. B as a purchases return. but Mr. A not purchased such goods from Mr. B.

also above transaction include GST Amount

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Ashish Garg

Ashish Garg (Expert)
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06 June 2018 Dear,

In GST a Credit Note must be linked to corresponding tax invoice.

Therefore, If in your case the person who has made the sale ( Mr. B) and the person who is receiving those goods back (Mr. A) are not same than as per GST provisions Mr. A cannot issue a credit note to Mr. C

Further, the return made by MR. C to Mr. A is not a purchase return rather it is a sale. Hence, Mr. C should issue a taxable invoice to Mr. A. On the basis of Mr. C's invoice Mr. A will get the ITC.

Process will remain same if subsequently Mr. A return those goods to Mr. B

Querist : Anonymous

Querist : Anonymous (Querist)

07 June 2018 but Sir, here Mr B (Manufacturer) accept only Purchases returns.

All such goods belong to EXPIRED Medicines.

and they reply (i.e. Mr. B), in case of expired medicines, as per Indian Medical Association rule that Mr. A accept such Expired Medicines.
and
Mr. B accept only purchases returns from Mr. A.

how can its possible under GST that Mr. A issuing Credit Not to Mr. C. and Mr. B accepted such goods from Mr. A as a purchases returns.

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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24 July 2024 It seems like you're dealing with a complex scenario involving expired medicines, credit notes, and purchase returns under the GST regime in India. Here’s a structured approach to address the issues raised:

### Scenario Recap:
1. **Expired Medicines**: Mr. C (retailer) returns expired medicines to Mr. A (wholesaler) due to the policy set by the supplier/manufacturer (Mr. B).

2. **Credit Note**: Mr. A issues a credit note to Mr. C, presumably without mentioning the GST amount.

3. **Purchase Return**: Mr. A then returns these expired medicines to Mr. B (the supplier/manufacturer) as a purchase return.

### Key Concerns:
- Mr. A did not directly purchase these goods from Mr. B, yet Mr. A is issuing a credit note to Mr. C and returning the goods to Mr. B.
- There’s confusion about whether GST was included in the credit note issued by Mr. A to Mr. C.
- Mr. B accepts only purchases returns, not sales returns.

### GST Implications and Accounting Treatment:
1. **Credit Note Issuance (Mr. A to Mr. C)**:
- Even though Mr. A did not directly sell these goods to Mr. C, if Mr. A issues a credit note to Mr. C, GST should have been included in the credit note amount. This is because GST needs to be reversed if it was originally charged and claimed.
- Mr. A must ensure that the credit note includes the GST amount and adjust the output tax liability accordingly in his GST returns.

2. **Purchase Return (Mr. A to Mr. B)**:
- When Mr. A returns the expired medicines to Mr. B, Mr. A should treat this as a purchase return.
- Mr. A needs to issue a debit note to Mr. B for the return of goods, mentioning the GST amount.
- Mr. A can claim Input Tax Credit (ITC) for the GST amount charged on the original purchase from Mr. B.

### Accounting Entries:
- **Credit Note Issuance by Mr. A to Mr. C**:
- Dr. Sales Returns (with GST amount)
- Cr. Accounts Receivable (Mr. C)

- **Purchase Return by Mr. A to Mr. B**:
- Dr. Purchase Returns (with GST amount)
- Cr. Accounts Payable (Mr. B)

### Additional Considerations:
- **Legal and Regulatory Compliance**: Ensure that all transactions comply with GST laws and regulations, especially regarding credit notes and purchase returns.

- **Documentation**: Maintain proper documentation for all transactions, including credit notes and debit notes, to substantiate GST claims and compliance during audits.

### Conclusion:
While the situation with expired medicines and return policies is challenging, it’s crucial to follow GST guidelines meticulously to avoid issues with tax authorities. Mr. A should ensure that all transactions involving credit notes and purchase returns are correctly accounted for with appropriate GST treatment. If there are specific legal or procedural uncertainties, consulting with a GST professional or tax advisor would be advisable for tailored guidance.