A sales return is a transaction where the buyer of inventory or other items sends these goods back to the seller. It can be due to various reasons such as poor quality, defective items or extra items being ordered. Sales is an outward supply whereas Sales Return is an inward supply.
Adjustment of the Tax Liability on Goods Return
The tax liability will reduced for the seller and the amount will reversed from ITC of the buyer’s GSTR-2a.
If the incidence of tax passed to another person (i.e., for any reason ITC cannot be reversed) then no reduction in tax liability. Thus, GST follows the general law of unjust enrichment that no one will be allowed to profit at another’s expense.
FAQs on Sales Return
Q1. Sales returned by registered buyer?
Ans. If goods are returned by a buyer registered under GST (he has provided his GSTIN), then the registered seller will issue a credit note to the buyer. The seller must declare the credit note in the GSTR-1 of the month in which it was issued.
Q2. What if Goods are returned in the next month?
Ans. If the amount is returned in the next month, then amount shall be shown in amendment column in GSTR-1 of next month.
Monthly GSTR-1 return filing taxpayers have the due date on the 11th day of the following month; for taxpayers who file it quarterly, the due date is the 13th day of the month after the end of each quarter, or such other days as may be extended by the government through notification.
For example, BabaTax sells 100 cups of Rs. 10 each to A on 25th June. A finds 10 cups are defective and returns them on 5th July. BabaTax will issue a credit note for Rs. 100 (10 x Rs.10) on 5th July. He will show the credit note in his GSTR-1 of July.
The credit note will automatically flow into A’s (buyer) GSTR-2 as a debit note.
Q3. When should the credit note be issued?
Ans. The credit note must be issued and declared within the specified time-
- By September of the next financial year, or
- Date of furnishing of the relevant annual return,
-whichever is earlier
So in our above example, BabaTax must declare his credit note of 5th July 2018 by the return of Sep. 2019. If he files his annual return of 2018-19 on 31st July 2019 then the last day to declare the credit note is 31st July 2019.
Q4. Goods returned by unregistered buyers ?
Ans. For returns by unregistered buyers, the seller will show a consolidated list of sales returns and other changes in sales details of previous months in his GSTR-1.
While breakup on an invoice level is not needed, the seller must give the breakup of intra-state & inter-state sales returns. For both, sales returns through e-commerce must be shown separately.
The following image shows how the sales returns from registered buyers will be reflected in GSTR1.
Q5. Goods GST rate at the time of sale was different at the time of sales return the rate is different, what to do?
Ans. We will return the supplies against the Tax Invoice. We will reverse with the same Tax Rate.
Q6. Where can i enter sales and purchase return details in gstr 3b?
Ans. No separate column in GSTR-3b for goods return. We have to show sales and purchases net of goods return in 3b.
Q7. What if goods returned but amount not refunded?
Ans. If goods are returned but the amount is not refunded for some reason , then the tax liability will not be reduced.
Q8. How to File GSTR – 3B if Sales Return (Credit Note) exceed Outward Supply?
Ans. Show nil sale (sales- sales return) and the left excess sales return show in next month. In GSTR3B you can’t show sales figures in negative. Or you can claim ITC on your sales return by filing the application and show total sales.
Q9. Goods Return in E-commerce Sales ?
Ans. We have to record separately the Sales returns from registered buyers and unregistered buyers. The reason is that we have to report separately in your GSTR-1.
Q10. What will be the effect of the Export Sales Return in GSTR-1 in subsequent month. How should we show return unlike raising Credit Note for B2B sales?
Ans. Credit note is the option and requirement under GST.
Q11. A seller from Delhi sells goods to a registered buyer of MP. Goods are delivered. After some days buyer said to seller to take back complete consignment. Seller want to take back the consignment but problem is buyer don’t want to give any documents. In this case how the seller take back his goods from MP. How to raise e way bill? Please suggest.
Ans. Seller can generate EWB under inward supply and sales return and use delivery challan for goods return and issue credit note to the buyer.
Q12. I was registered as proprietor under GST before. In June 18 I registered as LLP due to change in Constitution of business. I sold goods under proprietorship and received sales return under LLP. Now how should I record sales return in GSTR 1 as original invoice is under proprietor ship and return against same invoice is under LLP.
Ans. This case is not a Sale Return Because Proprietor and LLP are two different Entity. So it should not be treated as sale Return.
Q13. I am seller, how to issue E-way bill for Sales return?
Ans. Your Dealer generate e-way bill with debit note.
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The author of above article is Shruti Jain.
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