Issue of refunds
This query is : Resolved
09 August 2024
I have collected pre-publication charges and issued receipts to the customers. No invoice has been issued yet. Since the book cost is reduced, I have to refund the excess amount collected.
Kindly let me know whether I have to issue a refund bill and how the transaction is accounted in the books
Kindly let me know whether I have to issue a refund bill and how the transaction is accounted in the books
13 August 2025
1. Issuing Invoice & Receipt:
If you have only issued receipts and no tax invoices so far, technically, the GST liability is not crystallized as no invoice issued.
However, since you collected money, you should ideally issue a tax invoice at the time of supply.
In your case, since book price reduced and refund due, you need to issue a refund voucher/credit note for the excess amount collected.
2. Refund Voucher / Credit Note:
You should issue a credit note for the excess amount collected from customers as per Section 34 of CGST Act.
The credit note will reduce your output tax liability.
Mention details such as original receipt/reference, refund amount, reason for refund, and GST component.
3. Accounting Treatment:
When refund is given, pass the following entries:
At the time of collection (receipt) of pre-publication charges:
Bank A/c / Cash A/c Dr.
To Advance from Customers / Receipt against Books (Liability) A/c
On issue of tax invoice (if done):
Advance from Customers A/c Dr.
To Sales A/c
To GST Output A/c
On issue of refund/credit note:
Sales A/c / Advance from Customers A/c Dr.
GST Output A/c (reduce GST liability) Dr.
To Bank A/c / Cash A/c (refund paid)
4. GST Return Impact:
Reflect the credit note in your GSTR-1 and adjust output tax liability accordingly.
If the refund amount is significant, inform your GST officer and document properly.
If you have only issued receipts and no tax invoices so far, technically, the GST liability is not crystallized as no invoice issued.
However, since you collected money, you should ideally issue a tax invoice at the time of supply.
In your case, since book price reduced and refund due, you need to issue a refund voucher/credit note for the excess amount collected.
2. Refund Voucher / Credit Note:
You should issue a credit note for the excess amount collected from customers as per Section 34 of CGST Act.
The credit note will reduce your output tax liability.
Mention details such as original receipt/reference, refund amount, reason for refund, and GST component.
3. Accounting Treatment:
When refund is given, pass the following entries:
At the time of collection (receipt) of pre-publication charges:
Bank A/c / Cash A/c Dr.
To Advance from Customers / Receipt against Books (Liability) A/c
On issue of tax invoice (if done):
Advance from Customers A/c Dr.
To Sales A/c
To GST Output A/c
On issue of refund/credit note:
Sales A/c / Advance from Customers A/c Dr.
GST Output A/c (reduce GST liability) Dr.
To Bank A/c / Cash A/c (refund paid)
4. GST Return Impact:
Reflect the credit note in your GSTR-1 and adjust output tax liability accordingly.
If the refund amount is significant, inform your GST officer and document properly.
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