Imported goods returned under gst
This query is : Resolved
30 November 2017
Goods imported under GST regime were found to be defective. These are now to be returned to the foreign supplier.
the foreign supplier will issue a credit note against it and will send send fresh invoice for the correct goods to be sent.
What will be the applicability of GST.?
How will reversal of input claimed at the time of purchase will be done?
the foreign supplier will issue a credit note against it and will send send fresh invoice for the correct goods to be sent.
What will be the applicability of GST.?
How will reversal of input claimed at the time of purchase will be done?
30 November 2017
Take credit note and adjust IGST.
Reverse ITC claimed.
Reverse ITC claimed.
30 November 2017
Sir, could you please provide the relevant sections for this?
01 December 2017
how will the IGST be adjusted as the supplier is foreign company?
29 July 2024
When imported goods are returned under the GST regime, the process involves specific steps and considerations. Here's a comprehensive guide on how to handle the situation:
### **1. Applicability of GST on Returned Goods**
**Scenario:**
- Goods imported into India were found defective and need to be returned to the foreign supplier.
- The foreign supplier will issue a credit note for the returned goods and a new invoice for the correct goods.
**Applicability:**
- **Return of Goods:** The return of goods to a foreign supplier does not attract GST on the return itself because GST is not levied on exports (including the return of defective goods).
- **New Invoice:** For the fresh shipment of correct goods, IGST will be applicable as per the normal import procedures.
### **2. Reversal of Input Tax Credit (ITC) on Returned Goods**
When you return imported goods, you need to reverse the input tax credit (ITC) that was claimed at the time of import. Here’s how to handle it:
1. **Determine Reversal Amount:**
- Calculate the amount of IGST that was claimed as input tax credit on the defective goods.
2. **Reverse ITC in GST Returns:**
- **GSTR-3B:** In your GST returns for the period in which the return is processed, reverse the ITC by adjusting it in the appropriate section. This is generally done in the section where ITC adjustments are reported.
3. **Maintain Documentation:**
- Keep all documentation related to the return of goods, such as the credit note received from the foreign supplier and proof of return. This is important for compliance and future reference.
### **3. Adjusting IGST with Foreign Supplier**
Since the foreign supplier is issuing a credit note and will send new goods, the following points need to be addressed:
1. **Credit Note Adjustment:**
- **Foreign Supplier’s Credit Note:** The credit note issued by the foreign supplier reduces the value of the returned goods. Ensure that you adjust your records accordingly. However, this credit note does not affect Indian GST directly since GST on exports is zero-rated.
2. **IGST on New Goods:**
- When you receive the new goods, IGST will be applicable again. You will need to pay IGST based on the value of the new shipment. The IGST paid on this new shipment can be claimed as ITC.
3. **Recording in Books:**
- **Record Credit Note:** Reflect the credit note in your accounting records to reduce the value of the original purchase.
- **New Invoice:** When the new goods are received, account for the IGST as per the new invoice and claim ITC accordingly.
### **4. Practical Steps**
1. **Reverse ITC:**
- Make the reversal entry in your GST returns for the amount of IGST claimed on the defective goods.
2. **Receive New Goods:**
- Pay IGST on the new invoice issued for the replacement goods.
3. **Adjust Accounts:**
- **Credit Note Entry:** Adjust your purchase account and reverse the previously claimed ITC for the returned goods.
- **New Purchase Entry:** Record the new invoice in your purchase account and claim ITC on the new IGST paid.
### **Example Entries**
**When Returning Defective Goods:**
- **Reverse ITC:**
```plaintext
Debit: ITC Reversal Account (for the amount of IGST on returned goods)
Credit: Purchase Account (for the amount of IGST on returned goods)
```
**When Receiving Replacement Goods:**
- **Record New Purchase:**
```plaintext
Debit: Purchase Account (Invoice value + IGST)
Credit: Accounts Payable (Invoice value + IGST)
```
### **Conclusion**
1. **Return of Defective Goods:** No GST is applicable on the return itself. Reversal of ITC is necessary.
2. **New Goods:** IGST is applicable on the new invoice, and ITC can be claimed.
3. **Documentation:** Maintain proper documentation for both the return of defective goods and the new shipment to ensure compliance and accuracy in GST reporting.
By following these steps, you can manage the import and return of goods effectively within the GST framework.
### **1. Applicability of GST on Returned Goods**
**Scenario:**
- Goods imported into India were found defective and need to be returned to the foreign supplier.
- The foreign supplier will issue a credit note for the returned goods and a new invoice for the correct goods.
**Applicability:**
- **Return of Goods:** The return of goods to a foreign supplier does not attract GST on the return itself because GST is not levied on exports (including the return of defective goods).
- **New Invoice:** For the fresh shipment of correct goods, IGST will be applicable as per the normal import procedures.
### **2. Reversal of Input Tax Credit (ITC) on Returned Goods**
When you return imported goods, you need to reverse the input tax credit (ITC) that was claimed at the time of import. Here’s how to handle it:
1. **Determine Reversal Amount:**
- Calculate the amount of IGST that was claimed as input tax credit on the defective goods.
2. **Reverse ITC in GST Returns:**
- **GSTR-3B:** In your GST returns for the period in which the return is processed, reverse the ITC by adjusting it in the appropriate section. This is generally done in the section where ITC adjustments are reported.
3. **Maintain Documentation:**
- Keep all documentation related to the return of goods, such as the credit note received from the foreign supplier and proof of return. This is important for compliance and future reference.
### **3. Adjusting IGST with Foreign Supplier**
Since the foreign supplier is issuing a credit note and will send new goods, the following points need to be addressed:
1. **Credit Note Adjustment:**
- **Foreign Supplier’s Credit Note:** The credit note issued by the foreign supplier reduces the value of the returned goods. Ensure that you adjust your records accordingly. However, this credit note does not affect Indian GST directly since GST on exports is zero-rated.
2. **IGST on New Goods:**
- When you receive the new goods, IGST will be applicable again. You will need to pay IGST based on the value of the new shipment. The IGST paid on this new shipment can be claimed as ITC.
3. **Recording in Books:**
- **Record Credit Note:** Reflect the credit note in your accounting records to reduce the value of the original purchase.
- **New Invoice:** When the new goods are received, account for the IGST as per the new invoice and claim ITC accordingly.
### **4. Practical Steps**
1. **Reverse ITC:**
- Make the reversal entry in your GST returns for the amount of IGST claimed on the defective goods.
2. **Receive New Goods:**
- Pay IGST on the new invoice issued for the replacement goods.
3. **Adjust Accounts:**
- **Credit Note Entry:** Adjust your purchase account and reverse the previously claimed ITC for the returned goods.
- **New Purchase Entry:** Record the new invoice in your purchase account and claim ITC on the new IGST paid.
### **Example Entries**
**When Returning Defective Goods:**
- **Reverse ITC:**
```plaintext
Debit: ITC Reversal Account (for the amount of IGST on returned goods)
Credit: Purchase Account (for the amount of IGST on returned goods)
```
**When Receiving Replacement Goods:**
- **Record New Purchase:**
```plaintext
Debit: Purchase Account (Invoice value + IGST)
Credit: Accounts Payable (Invoice value + IGST)
```
### **Conclusion**
1. **Return of Defective Goods:** No GST is applicable on the return itself. Reversal of ITC is necessary.
2. **New Goods:** IGST is applicable on the new invoice, and ITC can be claimed.
3. **Documentation:** Maintain proper documentation for both the return of defective goods and the new shipment to ensure compliance and accuracy in GST reporting.
By following these steps, you can manage the import and return of goods effectively within the GST framework.
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