GST - DEBIT NOTE FOR REJECTION MATERIALS

[SAFETAB LIFESCIENCE]

Dear Experts,

We need on clarification. When we sending Raw Materials rejection materials (partly or fully) to the Original Suppliers, what documents should we send alongwith the consignment. Hope we have to send Debit Note with GST. If we raise our Debit Note, shall we have to raise only through E-Invoice.

If we raise Debit Note via Einvoice mode, it will be automatically reported in GSTR-1, Is it? But we should adjust/reverse the duty in our GSTR-3B as Purchase Return and we should not report that DN in GSTR-1 and increase the liability as like as outward supply. For our Purchase Return if we raise DN under Einvoice mode and if it is auto poulated / reported in GSTR-1, shall we remove that entry in GSTR-1 manually and file GSTR-1 ? and shall we adjust/reverse the same in our GSTR-3B.

[Punit Agarwal]

In Pharmaceuticals Industry generally the following two methods are followed:

1. To Issue Tax Invoice for Goods returned:-

In this case, for rejected material, recipient can book the whole invoice in their books of accounts and for rejected material the receipient can issue a counter Tax invoice with the details of rejected goods.

In this case there is no requirement to issue a DN or CN. All entries are correctly reflected in each other books of account. E-way bill and E-invoice needs to be issued if applicable.

2. To Issue Debit Note with Delivery Challan :

In this case a debit note is required to be issued to the supplier with material details along with a delivery challan for generating E-Way Bill. E Invoice is not required to be issued in this case. On the basis of the Details contained in Debit note and Delivery Challan, the supplier will issue a credit note which will get reflected in our GSTR-2A. We have to reverse the credit availed on the basis of the CN Issued by the Supplier. In this case we don't have to make any adjustment in GSTR-1.

[KASTURI SETHI]

I agree with Sh.Punt Agarwal. As per Explanation under Section 34(4) of CGST Act, Debit Note includes a supplementary invoice.

Relevant extract

"Explanation. - For the purposes of this Act, the expression “debit note” shall include a supplementary invoice."

[ABHISHEK TRIPATHI]

Dear Sir,

Documents required.

Delivery Challan with E-way Bill. If possible, you may give the Credit Note reference with the delivery challan.

Your supplier is required to issue Credit Note and reverse the ITC. For accounting purpose, if you have paid the money then you might raise a commercial debit note on your seller.

Look at the scheme of provision of Debit note under GST. Sec. 34(3), debit note is only raised by the supplier and not the recipient. Your situation is merely a sales return, no supply nothing.

I want to understand that if there is any loss on you or system restriction while following the above view.

Small Suggestion: Your contract with the supplier should contemplate such returns, so that, if the department comes to you then you may easily establish that it is merely a sales return and not a supply.

[KASTURI SETHI]

SH. ABHISHEK TRIPATHI JI,

Perfect advice, Sir.

[Ganeshan Kalyani]

I agree with the views of Sri Punit Sir at reply 1 point no.2. Further to add, once the material is received by the supplier he will raise credit note and generate e-invoice and also furnish in his GSTR 1.

[YAGAY andSUN]

Under the provision of GST Laws, Debit & Credit notes are issued only by the Supplier of Goods & Services.

[Lokesh Sharma]

Sir,

Please suggest what to do in the situations Like

- The supplier charged excess rate of goods/ defective goods/ late delivery

The supplier should raise credit note as per normal conditions. But in some disputed circumstances the supplier not agreed the rate difference or late delivery reasons and also not agree to file credit note in gst returns. Some of small industries suppliers not filling gst returns also. Than buyer stuck in the situation to reverse his input tax credit and also will penalize for claiming excess input and interest thereon. Many small supplier not qualified for understand the gst law they do not agree in any condition for file credit note. The buyer pays the full tax and in future he will pay penalty with interest also. please suggest.....

AI Summary

Guidance on Documenting Rejected Goods Returns: Tax Invoice vs. Debit Note for GST Compliance A company inquired about the appropriate documentation for returning rejected materials to suppliers under GST regulations. They asked whether a Debit Note (DN) should be issued through E-Invoice and how it affects GSTR-1 and GSTR-3B filings. Responses varied: one expert suggested issuing a Tax Invoice for returned goods, eliminating the need for a DN. Others recommended issuing a DN with a Delivery Challan, which does not require an E-Invoice, and advised reversing credit based on the supplier's Credit Note. Additional advice included ensuring contracts cover returns and understanding the implications of supplier non-compliance with GST filings.