How to reverse the sale invoice

[THYAGARAJAN KALYANASUNDARAM]

Dear Experts,

One of my client's who supplied goods to their customer on a contract basis, i.e. supply, erection, testing and commissioning basis against the purchase order.

Terms of Payment : No advance payment only after completion of the contract, the customer would release the entire payment.

My client despatch the goods to their customer along with invoice in Feb,2020. But now feb, 2021 only the contracts got completed. When we are asking for the payment, the customer said that, the invoice should be raised only now and the invoice raised in Feb,2020 was not accounted.

My query is how to make fresh invoice in order to collect the payment along with tax and reversing the old invoice F.Y. 2019-2 . We have already disclosed this invoice in feb,2020 and discharged the taxes to GST and the revenue was recognised in Income Tax also.

Thanks in Advance.

[Shilpi Jain]

A pretty difficult situation to handle unless the accounting in your books for FY 2019-20 can be changed along with the return workings to depict that the invoice was booked in your books in FY 20-21 only.

[Ganeshan Kalyani]

As Sept 2020 was the last return period by which credit note for invoice of FY 2019-20 can be issued with GST, there will be loss to you (of GST amount) if you raise credit note now in Feb 2021. As your client is asking for fresh invoice, if you raise invoice with GST now then GST is payable. So the GST which was paid last year can be claimed as a reimbursement from you client thru financial credit note. However, if the terms of contract is such as explained by you this too is difficult. No wayout it seems.

[YAGAY and SUN]

We endorse the view of Experts.

AI Summary

Credit note deadline prevents reversing prior invoice, so fresh invoice now attracts GST and earlier tax may be reclaimed.
The supplier issued an invoice in an earlier year and declared GST and income in that year; the buyer now demands a fresh invoice. Amending accounting to treat the invoice as recorded in the later year is one option but requires restating books and returns. The statutory window for issuing a credit note to adjust the earlier-year GST has passed, so issuing a new invoice now creates fresh GST liability; recovery of previously paid tax depends on contractual reimbursement (financial credit note) from the buyer, which may be difficult given the contract terms.