Goods return under sales tax

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

19 August 2013 A IS SELLER FROM GUJARAT WHO SELLS GOODS TO BUYER B IN MAHARASHTRA FOR RS 10000/- PLUS CST @ 02% RS 200/-IN THE MONTH OF JUNE-13. SELLER A PAID CST TO GUJARAT GOVT FOR CST RS 200/- FOR JUNE-13

NOW AGAIN SELLER FROM GUJARAT SELLS GOOS FOR RS 50000/- @ 02% CST FOR RS 1000/- TO NEW BUYER-C IN MAHARASHTRA IN THE MONTH OF JULY-13. ASLO BUYER A FROM MAHARASHTRA WHO BOUGHT GOODS IN JUNE-13 RETURNED THE SOLD MATERIAL TO SELLER OF GUJARAT.

NOW WHAT WILL BE CST LIABILTY FOR JULY-13 FOR GUJARAT DEALER WHO SALES THE GOODS

WHAT IS THE EXCACT RULE OF SALES GOODS RETURN RULE UNDER CENTRAL SALES TAX FOR TAKING INPUT CREDIT OF CST FOR PAYMENT OF CENTRAL SALES TAX FOR GOODS RETURN UNDER CST ACT. CAN WE TAKE INPUT OF CST FOR PAYMENT OF CENTRAL SALESTAX

MJ Krishnamurthy

MJ Krishnamurthy (Expert)
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20 August 2013 Your question is not properly expressed. However, once the goods are sold on June 13,it will be declared in the return for the month of June. In july another sale is done to C for Rs50,000/-and Rs1000/- has been collected. When the goods sol in June are returned the return of that month is to be revised or it can be shown in the returnof July. Actual sales for July is Rs50,000/- minus sales returns Rs10,000/- = Taxable sales for July is Rs40,000/-,and tax payable is Rs800/- only,altough Rs1000/- has been collected. This method is permitted. This way the excess paid in June is adjusted in July. This arrangement is permitted if the return were sold within the previous six months only....mjk

CA PARTH SHAH

CA PARTH SHAH (Expert)
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22 June 2015 I would like to correct Mr MJ Krishnamurthy that in the VAT return gross sale has to be reported. Plus the tax paid on the returned goods sold under CST cannot be adjusted against liability of current month.

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Asha Kanta Sharma online

Asha Kanta Sharma

(Expert)
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26 July 2024 Under the Central Sales Tax (CST) Act, handling of goods returns and the corresponding CST implications can be intricate. Here’s a detailed explanation of the scenario and relevant rules:

### **1. Understanding the Scenario**

- **Seller A** (from Gujarat) initially sells goods to **Buyer B** in Maharashtra for ₹10,000 plus CST @ 2% (₹200) in June 2013. CST is paid to the Gujarat government.
- **Buyer A** returns the goods to Seller A in July 2013.
- **Seller A** also sells new goods to **Buyer C** in Maharashtra for ₹50,000 plus CST @ 2% (₹1,000) in July 2013.

### **2. CST Liability and Adjustments for July 2013**

**a. CST Liability Calculation**

1. **Sale to Buyer C**:
- For the new sale of ₹50,000 with CST @ 2%, the CST liability is ₹1,000. This amount should be paid to the Gujarat government for the sale made in July 2013.

2. **Return of Goods by Buyer A**:
- When Buyer A returns goods, Seller A must issue a credit note and adjust the CST liability accordingly. The return affects the CST for the earlier sale made in June.

**b. Adjustments for Goods Return**

1. **CST on Goods Returned**:
- **Reverse CST**: Since the goods sold to Buyer A are being returned, Seller A should reverse the CST that was previously collected on the sale to Buyer A.
- **Credit Note**: Issue a credit note for the CST amount of ₹200 related to the returned goods. This will adjust the sales tax records.

2. **CST Reporting**:
- **Adjustment in Returns**: Adjust the CST liability for July 2013 by deducting the CST amount that was initially collected and should now be reversed due to the goods return.
- **Tax Returns**: Ensure that the CST return for July 2013 reflects the adjusted CST liability, including both the sale to Buyer C and the reversal for the returned goods from Buyer A.

### **3. Rules for CST and Goods Return**

**a. CST Input Credit Rules**

- **No Input Credit for CST**: Under the CST Act, there is no provision for claiming input tax credit on CST paid. CST is a tax on inter-state sales and is not eligible for input credit.

- **Adjustments Only**: The primary mechanism for handling returned goods under CST is to issue a credit note and adjust the CST liability accordingly. Input credit for CST is not available, so the adjustment involves only the reversal or credit of CST on the return of goods.

**b. Sales Return Adjustment**

1. **Issue Credit Note**: For returned goods, issue a credit note to Buyer A for the CST amount collected (₹200).

2. **Adjust CST Liability**: Adjust the CST liability for the period in which the return occurs. Ensure that the adjustment is reflected in the CST return.

### **4. Summary**

1. **For July 2013 CST Liability**:
- **Sale to Buyer C**: CST liability is ₹1,000.
- **Adjustment for Return**: Deduct the CST amount of ₹200 related to the returned goods from Buyer A.

2. **CST Rules**:
- **No Input Credit**: CST paid on purchases cannot be claimed as input credit.
- **Issue Credit Note**: Issue a credit note for returned goods and adjust the CST liability in your returns.

### **Practical Steps**

1. **Issue a Credit Note**: For the returned goods from Buyer A and reflect the credit note in your records.
2. **Adjust Returns**: Modify your CST return for July 2013 to reflect the adjustment due to the goods return.
3. **Pay CST**: Ensure to pay the correct CST amount for the new sale to Buyer C, and adjust the amount due to the return.

For specific situations or further clarifications, consulting with a tax expert or accountant familiar with CST regulations is advisable.