Treatment of Input Credit on expired goods returned beyond six months from date of sale

[gurmukh kotwani]

Medicines purchased locally in Delhi by a Distributors on which he claimed input credit at the time of purchase. The above medicines were further sold to Retailers on which output tax due thereon was paid. On their expiry after more then six month from date of sale these medicines were returned by Retailer to Distributors. Distributor did not reverse its output tax liabilities because returns being beyond six month from date of sale. Expired medicines were further returned back by Distributor to supplier. The supplier issued credit notes only for basic sales price and did not return tax amount because returns being beyond six month from date of purchase.

Whether Distributor is required to reverse input credit on expired goods return beyond six month especially when he has not been given credit of tax amount in credit notes issue by the supplier and supplier has also not reduced its output tax liability ?

[YAGAY and SUN]

Dear Gurmukh,

 Since, the expired goods (medicines) were returned beyond the period of Six months, in our opinion Input Tax Credit need not to be reversed.

However, In this scenario, We ( Team YAGAY & SUN) would suggest you to seek a clarification from the Delhi VAT Department under the provisions of DVAT Act, 2005, on payment of nominal fees.

Regards,

Team YAGAY & SUN

(Indirect Tax Consultants)

 

AI Summary

Input tax credit treatment where expired goods are returned after the six month period, advising departmental clarification.
Whether a distributor must reverse Input Tax Credit when expired medicines are returned beyond six months: distributor claimed input credit and paid output tax on sales, retailers returned expired stock to distributor beyond six months who then returned stock to supplier; supplier issued credit notes for basic price without tax adjustment. Advisory opinion: returns after six months do not require reversal of input credit, but seek formal clarification from the VAT authority.