GST Rate on goods return/Credit note after Increase in rate

[ROHIT GOEL]

Dear Experts,

Party A had received goods on 15th Sep 2025 at rate of 12% however thereafter GST Rate was increased to 18%. Now, Party A wants to return the goods. My query is:

a) What rate should be charged on credit note-12% or 18%

b) Legal citation/provision which specifically addresses this situation

The doubt arises because if the return is treated as a new supply then rate applicable on return date should be charged. However, on flip side, supplier earlier paid 12% GST on o/w supply then how we can claim back 18% GST from govt via credit note. Kindly shed some clarity.

[Sadanand Bulbule]

Section 34(1) of the CGST Act, 2017:

Where a tax invoice has been issued and the taxable value or tax charged in that tax invoice is found to exceed the taxable value or tax payable, the registered person, who has supplied such goods or services, may issue to the recipient a credit note containing such particulars as may be prescribed.  

Credit note is directly linked to the original tax invoice — hence the rate and tax amount must be consistent with that original invoice.

So in your case it should be 12% only

[KALLESHAMURTHY MURTHY K.N.]

Sir, 

I agree with the answer of Sri Sadanand Bulbule Sir.

According to Sec. 34, when Party A returns the goods, the tax adjustment is based on the original invoice, not the new GST rate. The supplier who sold the goods to Party A must issue a credit note for the return, applying the 12% GST that was charged at the time of the sale. The returns shall be filed accordingly.  Hence, there is no question of claiming back @ 18% GST.

[Ganeshan Kalyani]

You may consider it to be fresh supply and charge new rate. 

[Shilpi Jain]

If you issue credit note then you are reducing the original taxable value and GST @ 12%.

If you as a recipient are treating the return as a fresh supply then @ 18%. 

AI Summary

Credit note linkage to original invoice requires applying the tax rate charged on the original supply, not the later rate. A credit note serves as an adjustment to the original tax invoice and must reflect the taxable value and tax charged on that original invoice; thus the supplier should issue the credit note consistent with the rate and tax amount on the original sale. An alternative view treats the return as a fresh supply, in which case the prevailing rate at the time of that supply would apply.