Itc on returned goods

This query is : Resolved

Report Abuse Follow Query Ask a Query

Querist : Anonymous

Querist : Anonymous (Querist)

01 August 2013 What is the time frame (if any) for claiming vat paid on goods which have been returned?

RENGARAJ R.K

RENGARAJ R.K (Expert)
Follow

01 August 2013 It depends on the STATE VAT Act. Kindly inform us the STATE the query relates to.

E.g
Tamilnadu - 6 months
kerala-3 months
AP - 1 year
Karnataka - 6 months........

Querist : Anonymous

Querist : Anonymous (Querist)

04 August 2013 Sale was made in Sep12 to a Govt dealer in UP Tax Invoice was issued. In June 13 Client used the warranty clause to reject the material and we had to refund the cost to them. The rejected material was returned to us.
1. Can we claim the Vat we had paid at time of sale.
2. In our account books what value of returned good will be reflected. (Basic +VAT +fwdg+frt)

Upgrade to CAclubindia Pro. Subscribe Now!

Asha Kanta Sharma online

Asha Kanta Sharma

(Expert)
Follow

02 August 2024 In the scenario you've described, where VAT was paid on a sale in September 2012, and the goods were returned under warranty in June 2013, you can generally address VAT and accounting treatment as follows:

### 1. Claiming VAT on Returned Goods:

Yes, you can claim the VAT paid at the time of the sale when goods are returned. This is often referred to as a "credit note" or "adjustment note" procedure. The key steps usually involve:

- **Issue a Credit Note:** You should issue a credit note or a similar document reflecting the return of goods and the VAT amount originally charged.
- **Adjust VAT Returns:** The VAT you claim back will typically be reflected in your VAT return for the period in which the return occurred. This means you need to include the VAT adjustment in your VAT return for the period in which June 2013 falls.

### 2. Accounting for Returned Goods:

In your accounting books, the value of the returned goods should reflect:

- **Basic Value:** The value of the goods without VAT.
- **VAT:** The VAT component that was originally included in the sale.
- **Forwarding Charges:** If forwarding charges were incurred at the time of the sale and are relevant to the return, they should be reversed as well.
- **Freight Charges:** Similarly, if freight charges were part of the initial sale, these should be reversed as well.

### Specific Accounting Treatment:

- **Sales Return Entry:** The return should be recorded as a sales return. This typically involves debiting the Sales Return account and crediting the Accounts Receivable (or Customer account). The amount should be the basic value plus VAT.
- **Reverse Forwarding and Freight Charges:** If these were previously recorded, they should also be adjusted. For example, debit the Forwarding Charges and Freight Charges accounts and credit the respective expense or liability accounts if applicable.

### Summary:

- **Claim VAT:** Yes, you can claim VAT paid on returned goods by issuing a credit note and adjusting your VAT return.
- **Accounting Value:** Reflect the returned goods at their original value plus VAT, and adjust for any forwarding and freight charges as necessary.

For precise compliance, it's always a good idea to consult the VAT laws applicable in your jurisdiction or seek advice from a tax professional.