TaxTMI 
TaxTMI 
Hello everyone,
My query is how to account for the rejected material by the purchaser in Books of Account. The purchaser is denying to issue Debit Note / Rejection Memo. Sale Invoice has already been raised.
TREATMENT OF REJECTED GOODS
01 Feb 2019 
7 Replies 
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Credit note used to nullify rejected goods and adjust GST liability when purchaser refuses to issue a debit note.
When a purchaser rejects goods after a sale invoice and will not issue a debit note, the seller should issue a credit note to nullify the supply and reduce output tax liability; the recipient must reduce its input tax credit accordingly. For exported goods re imported, a credit note can be issued while customs notifications govern duty reversal and reversal of any export benefits; where the purchaser has not recorded the purchase, issuance of the credit note remains the operative method to effect accounting and tax nullification at the seller's end. (AI Summary)
When a purchaser rejects goods after a sale invoice and will not issue a debit note, the seller should issue a credit note to nullify the supply and reduce output tax liability; the recipient must reduce its input tax credit accordingly. For exported goods re imported, a credit note can be issued while customs notifications govern duty reversal and reversal of any export benefits; where the purchaser has not recorded the purchase, issuance of the credit note remains the operative method to effect accounting and tax nullification at the seller's end. (AI Summary)