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The common trade practiced followed in case of pharmaceutical sector is that the drugs or medicines are sold by manufacturer to the wholesaler and then further to the retailer on the basis of Invoice or Bill of supply as the case may be. It is noteworthy that these goods have a definite life (expiry date) Once which has crossed their date of expiry is returned back to the manufacturer.

Return of time expired goods to be treated as fresh supply

Incase the register person is returning the expired goods. He may at his option treat such return as fresh supply and treat it as fresh supply and there by issuing an invoice for the same. The value of the said goods in the invoice on the basis of which the goods were supplied earlier may be taken as a value of such goods. Also the recipient of such goods shall be eligible to avail ITC of the tax levied on the said return subject to the condition specified under section 16 of CGST Act, 2017 exception in case of composition taxpayer and unregistered person ITC would not be eligible. Also the Composition dealer would be liable to pay tax at the rate applicable to them.

However incase returned goods are destroyed by the manufacturer ITC with regards to such goods shall be reversed as per sec17 (5) of CGST Act, 2017.

Return of time expired goods by issuing credit note

As per Section 34(1) supplier can issue credit note when goods are returned back by recipient. Thus the manufacturer or wholesaler may issue a credit note in relation to the time expired supplies and retailer or wholesaler may return the time expired goods by issuing delivery challan. It would be noteworthy to point that there is no time limit for issuance of a credit note in the law except with regards to adjustment to tax lability i.e. credit notes issued prior to month of September following the end of financial year shall be liable for tax liability adjustments.

It should be noted in case credit note is issued after the time limit specified in section34 (2) has lapsed and such credit note is issued thereafter There is no such requirement  to declare such credit note on the common portal by the supplier. Thus the tax liability with regards to this credit note cannot be adjusted.

Further incase of goods returned by wholesaler or retailer if destroyed manufacturer the ITC on the same shall be reversed under section 17(5)(h) of CGST Act,2017

Date of supply of goods

Date of return of time expired goods

Treatment in terms of tax liability & Credit note

1st July 2017

20th September  2018

Cr Note will be issued by supplier and the tax liability for the same adjusted unless the recipient of goods have not availed the Credit or has reversed the same

1st July 2017

20th October  2018

Cr Note will be issued but there is no requirement to upload the same on common portal


Published by

Heet Shah
(Tax Consultant)
Category GST   Report

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