GST Effect on Rate Changes with Effective from 18-07-2022

This query is : Resolved

SUDHEEP M (Querist)
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05 August 2022 Sir,

I have sold goods @ 12% to a customer at Rs. 1000+GST(1120) prior to 18-07-2022. The same Goods was returned on 30-07-2022. But after 18-07-2022 the tax rate changes to 18%. Now as per law I have to take return of goods at Rs. 1180. How can I deal with the situation. Here, suppler have an credit of Rs. 60 on account of ITC (Tax paid Rs. 120- Tax on Return Rs. 180). Please reply Immediately Sir..

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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07 July 2024 In the scenario you described, where you sold goods at 12% GST prior to 18th July 2022 and the customer returned the goods after 18th July 2022 when the GST rate increased to 18%, here’s how you can handle the situation:

### Calculation and Adjustment Steps:

1. **Original Sale Transaction (Before 18th July 2022):**
- Sale Price: Rs. 1000
- GST @ 12%: Rs. 120
- Total Invoice Amount: Rs. 1120

2. **Return of Goods (After 18th July 2022):**
- Revised Sale Price: Rs. 1180 (including GST @ 18%)

3. **Adjustment of Input Tax Credit (ITC):**
- Original GST Charged: Rs. 120
- GST on Return @ 18%: Rs. 180
- Credit Note Value: Rs. 1180

### Steps to Adjust the Credit Note:

1. **Issue a Credit Note:**
- Issue a credit note to the customer for Rs. 1180. Mention the revised sale price and the adjusted GST amount of Rs. 180 (18% on Rs. 1000).
- Clearly specify that this credit note is being issued due to the return of goods after the change in GST rate.

2. **Adjustment of ITC:**
- Reverse the ITC claimed on the original sale (Rs. 120) as per GST rules since the goods are returned and the tax amount applicable has increased.
- You have already mentioned a credit of Rs. 60 on account of ITC (Tax paid Rs. 120- Tax on Return Rs. 180).

3. **Accounting Entries:**
- Debit Customer’s Account: Rs. 1180
- Credit Sales Account: Rs. 1000
- Credit GST Output Account (12%): Rs. 120
- Debit GST Output Account (18%): Rs. 180
- Credit ITC Account: Rs. 60

### Compliance Considerations:

- Ensure the credit note and adjustments are made in accordance with GST rules and regulations.
- Maintain proper documentation and records of the credit note issued and the adjustments made.
- Reflect these changes accurately in your GST returns (GSTR-1, GSTR-3B) for the respective tax periods.

### Conclusion:

By issuing a credit note for Rs. 1180 and adjusting the ITC accordingly, you align with GST compliance requirements while accommodating the change in GST rate post-sale. If you need further assistance with specific accounting entries or compliance aspects, consulting with a tax advisor or GST expert would be advisable to ensure accurate handling of this transaction.

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