Rejected goods sent back to composite scheme supplier

[Narendra Soni]

We (GST registered manufacturer) received goods from composite scheme supplier, the said good is rejected by us, how to bill him t the time of sending rejected goods to him. whether to charge GST or not in tax invoice.

[PAWAN KUMAR]

Dear Sir,

As per my view, Composition dealer is required to issue bill of supply and not to charge GST on the said bill of supply. In case if you received the goods from composition supplier and after getting accounted for into your accounts book the said goods become rejected, then you will also have to issue bill of supply for returing the said goods to composition supplier.

[Ganeshan Kalyani]

The supplier has to issue Credit note for goods return. Ask the supplier to do it. And you prepare a Delivery Challan on the support of credit and return the goods.

[KASTURI SETHI]

Before arriving at decision the querist should also go through extract of Board's circular. It is about time expired goods.

Relevant extract of Board's circular no.72/46/2018-GST dated 26.10.18.

Para No.3 A (b) In case the person returning the time expired goods is a composition taxpayer, he may return the said goods by issuing a bill of supply and pay tax at the rate applicable to a composition taxpayer. In this scenario there will not be any availability of ITC to the recipient of return supply.

[KASTURI SETHI]

On a second thought, the method of issuance of credit note by the supplier and return of goods by way of delivery challan is preferable to the method of 'Bill of supply' as return of goods via bill of supply is for specific purpose i.e. for time expired goods (pharmaceutical products) and the method suggested by Sh.Ganeshan Kalyani Ji is for all general purposes. Moreover, you want to cause movement of tax paid goods. Hence no revenue loss by way of both methods. You are safe in transit by both ways but the method of delivery challan accompanied by E-way bill is safer than method of bill of supply.

[PAWAN KUMAR]

Dear sir,

Circular No.72 provides for medicines/drugs for return in case of expiry. The said circular provides two options 1- treat the return of goods as fresh supply and issue invoice, 2-issuing credit note by supplier and delivery of goods by buyer under cover of the delivery challan.

as per my view since composition supplier supplied the goods, credit note to issue and delivery challan to issue by buyer for returning the said goods. The above circular also allow same process for cases other than medicine/drugs expiry.

AI Summary

Return of rejected goods to composition supplier: issue credit note and use delivery challan; bill of supply limited to expired goods.
Preferred procedure for returning rejected goods from a composition scheme supplier is issuance of a credit note by the supplier and return of goods by the buyer under a delivery challan (with e way bill as required). Alternatively, for time expired medicines the supplier may issue a bill of supply treating the return as a fresh supply at composition rate, but such bill of supply treatment disallows input tax credit to the recipient.