TaxTMI 
TaxTMI 
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?
Recovery of Cylinder Cost
23 May 2023 
11 Replies 
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GST treatment of cylinder recovery: treat as new supply and issue tax invoice if title transfers; penal charges may be non taxable.
Recovery for non returned cylinders is not a debit note under section 34 because it does not correct the taxable value of the original gas supply. If contract terms treat non return as a transfer of title, the recovery constitutes a new supply of goods (cylinders) and a tax invoice charging applicable GST should be issued. If the charge is penal in nature to ensure return, it may be non taxable. Treating the recovery as a sale raises e way bill, reporting and valuation risks which must be managed with consistent documentation. (AI Summary)
Recovery for non returned cylinders is not a debit note under section 34 because it does not correct the taxable value of the original gas supply. If contract terms treat non return as a transfer of title, the recovery constitutes a new supply of goods (cylinders) and a tax invoice charging applicable GST should be issued. If the charge is penal in nature to ensure return, it may be non taxable. Treating the recovery as a sale raises e way bill, reporting and valuation risks which must be managed with consistent documentation. (AI Summary)