TaxTMI 
TaxTMI 
What would be GST Implication if Importer raise Debit note to Foreign supplier on account of defective material supplied by him?
Debit note to Foreign supplier by Importer
17 Oct 2020 
7 Replies 
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GST treatment of importer recoveries from foreign suppliers: compensation not taxable; declare true value to Customs.
Recoveries by an importer from a foreign supplier via debit note for defective goods are treated as compensation, not consideration, and therefore GST is not applicable; only suppliers ordinarily issue credit/debit notes and foreign suppliers in non taxable territory do not attract GST. The debit note and supporting documents should be submitted to the authorised dealer to adjust foreign payments, and any replacement or free of cost items must be correctly valued and declared to Customs to avoid under valuation and short payment of customs duty. (AI Summary)
Recoveries by an importer from a foreign supplier via debit note for defective goods are treated as compensation, not consideration, and therefore GST is not applicable; only suppliers ordinarily issue credit/debit notes and foreign suppliers in non taxable territory do not attract GST. The debit note and supporting documents should be submitted to the authorised dealer to adjust foreign payments, and any replacement or free of cost items must be correctly valued and declared to Customs to avoid under valuation and short payment of customs duty. (AI Summary)