21 July 2022
We supplied goods to our customer after buying from the supplier who issued us normal bill although the dealer was liable to issue E-invoice. Our customer have rejected goods and we want to return goods to the supplier. What will be the process of return? Since we are returning the goods will our ITC BE effected as dealer is issuing normal invoice instead of einvoice. Please clarify all the effects of goods return and process involved for return of goods.
11 July 2024
Returning goods when the supplier has issued a normal invoice instead of an e-invoice can have implications on Input Tax Credit (ITC) and requires adherence to GST regulations. Here’s a detailed explanation of the effects and the process involved:
### Effects of Goods Return:
1. **Impact on ITC**: - **ITC Claimed on Purchase**: When you initially purchased the goods from the supplier who issued a normal invoice, you would have claimed ITC based on that invoice. - **Returning Goods**: Upon returning the goods to the supplier due to rejection by your customer, you must reverse the ITC claimed earlier. This is necessary because the ITC claimed is based on the tax invoice issued by the supplier, and returning goods nullifies the original transaction. - **Reversal of ITC**: The amount of ITC claimed on the goods returned needs to be reversed in your GST return for the tax period in which the goods are returned. This is reported in Table 4 of GSTR-3B under "Input Tax Credit (ITC) Reversal."
2. **Effect on E-invoice Requirement**: - Since the supplier issued a normal invoice instead of an e-invoice (if applicable), it doesn't directly impact your ITC reversal process. However, the supplier might face penalties for not issuing an e-invoice if they were required to do so under GST rules.
### Process for Return of Goods:
1. **Communication**: Notify the supplier about the rejection of goods by your customer and your intention to return the goods.
2. **Document Preparation**: - Prepare a return invoice or a credit note (if applicable) detailing the goods being returned. - Mention the original invoice number against which the goods were purchased from the supplier.
3. **Goods Return**: - Arrange for the physical return of the goods to the supplier’s premises. - Ensure that the goods are returned in the condition as agreed upon with the supplier.
4. **Credit Note**: - Once the goods are returned, the supplier should issue a credit note to you, adjusting the value of the goods returned against the original invoice. - The credit note must contain all details as prescribed under GST rules, including the original invoice number, reason for issuing the credit note, and amount of tax.
5. **ITC Reversal**: - Upon receiving the credit note from the supplier, you need to reverse the ITC corresponding to the returned goods in your GST return for the relevant tax period. - Adjust the amount of ITC claimed earlier by reducing it with the amount mentioned in the credit note.
6. **Reporting in GST Returns**: - Report the details of the goods returned and the corresponding ITC reversal in your GSTR-3B for the tax period in which the goods were returned.
### Conclusion:
Returning goods to a supplier due to rejection by your customer involves reversing the ITC claimed on those goods in your GST returns. The process includes notifying the supplier, preparing a return document (invoice or credit note), physically returning the goods, and adjusting the ITC claimed in your GST returns. The supplier, although required to issue an e-invoice (if applicable), will issue a credit note to facilitate the return. Ensure compliance with GST regulations and proper documentation to manage the return of goods effectively.
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