GST ON SALES OF UNSALABLE RESDYMADE GARMENTS AND FABRICS

[VIJAY GUPTA]

There was a closing stock of ₹ 20,000.00 of readymade garments taxable@5% and ₹ 100000.00 of fabric as tax free at 30.06.2017 as shown during migration to GST. The dealer received fabrics from factory and converted in readymade garments from job work, hence, no ITC was available during VAT regime. The said stock can be sold st ₹ 5,000.00 only. Now said stock became out of fashion and is not in a condition of sale.

The question is what rate of tax to be charged on such sale and how to show difference, between stock value and sale price, in books of accounts.

[Ganeshan Kalyani]

The inventory would be credited and cost of goods sold account would be debited. The value would be of inventory. On the supply part, the revenue account would be credited and customer account would be debited. The value would be the sale price.

AI Summary

GST on unsalable goods: tax rate not specified; account for loss by adjusting inventory and recognising sale at transaction price. Sale of migrated stock sold below book value raises GST rate and accounting issues. The advisory does not specify the applicable GST rate. Accounting treatment: credit inventory and debit Cost of Goods Sold for the book value; recognise revenue at the actual sale price by crediting revenue and debiting the customer account. Tax liability must be determined by applying GST classification and valuation rules to the transaction price.