Recovery of Cylinder Cost

[Kaustubh Karandikar]

XYZ selling Gas in cylinders. The cylinders are on returnable basis and once it gets emptied, the customer returns it back. If the customer is not returning the cylinders back, XYZ is recovering the cylinder cost from the customer. XYZ need to issue a debit note on the customer for cylinder cost or raise a service invoice for penalty for not returning the cylinders?

AI Summary

XYZ's Cylinder Return Policy: Debit Note or Tax Invoice Debate under Section 34 and GST Implications A discussion on a forum revolves around whether XYZ, a company selling gas in returnable cylinders, should issue a debit note or a service invoice when customers fail to return the cylinders. Amit Agrawal advises that if the non-return of cylinders is treated as a penalty, GST is not applicable. However, if it is considered a sale, a tax invoice with applicable GST should be issued. He emphasizes that a debit note under section 34 is not suitable as the original transaction was for gas, not cylinders. Kaustubh Karandikar and Padmanathan Kollengode support this interpretation, noting contractual implications and potential issues with tax authorities.