Sales return under gst

Save Share

This query is : Resolved

anand (Querist)

07 May 2019 Dear Sirs,
Sec-34 of GST restrict to issue credit note to the customer against sales return not later than September following the end of the financial year in which such supply was made, or the date of furnishing of the relevant annual return. We are in trading activity and some times get return of goods from customer even after 2 years. GST is silent on this case. during VAT regime we use to take back material without reversing VAT/CST amount. can you please suggest how to take the material back and how to disclose these material in GST return.

CA Anita Bhadra

CA Anita Bhadra (Expert)

07 May 2019 My suggestion is that your customer can raise invoice and send material back to you . It will be treated as fresh supply and your customer can show in his GSTR 1 and you can take credit for payment against returned good

anand

anand (Querist)

07 May 2019 Thanks Ms. Anita. Whether we can use purchase route as standard for all transaction even which is within eligible period. Also please suggest it's accounting impact as it will be seen as revenue exaggeration.

Aashok Kumar Sharma online

Aashok Kumar Sharma

(Expert)

23 July 2025 This is a tricky situation many traders face under GST. Let me break down the key points and best practice for handling sales returns beyond the credit note issuance period.

---

### Key facts:

* **Section 34 of the CGST Act** states:

* Credit notes (to adjust tax on sales return) **must be issued within September following the end of the financial year** in which original supply was made, or before filing the annual return, whichever is earlier.
* This means if your sale was in FY 2018-19, you have to issue credit note by September 2019 latest.

* You mention returns happening **after 2 years**, which is beyond the time limit allowed for credit notes.

* Under **VAT**, returns were taken back without reversing VAT, but GST rules are stricter.

---

### How to handle sales return beyond credit note issuance period?

---

### Option 1: Customer raises a fresh invoice for return (purchase) to you

* Your customer can **issue a tax invoice on the return (purchase) to you**.

* This is treated as a **fresh supply** from customer to you.

* You can claim **input tax credit** on this purchase invoice.

* You record it as a **purchase transaction** in your books.

---

### Option 2: Direct purchase entry without credit note (not recommended)

* If you just take back material without any document, you **cannot reverse your output GST** on original sale, which is against GST rules.

* This may lead to mismatch issues in GST returns.

---

### Regarding your question on using purchase route as standard:

* Using the **purchase route for all returns** (even within eligible period) can cause problems:

* It may **overstate your revenue** (since original sale remains recorded fully).

* Tax authorities may question the mismatch between your original sale and purchase return from customer.

* Therefore, **within eligible period, issue credit note** to reverse sale and tax correctly.

* Beyond the period, the customer-initiated invoice for return (Option 1) is safer.

---

### Accounting Impact:

| Scenario | Impact |
| -------------------------------- | ---------------------------------------------------- |
| Credit note issued in time | Reduces revenue and output GST accordingly |
| Return beyond credit note period | Revenue remains, purchase (input) recorded on return |
| No document for return | Revenue and output GST overstated; compliance risk |

---

### Summary and Best Practice:

| Time Period | Correct Document | Accounting Treatment |
| ----------------- | -------------------------------- | ---------------------------------------------- |
| Within time limit | Credit note by seller | Reverse sales & GST, reduce revenue |
| Beyond time limit | Customer issues purchase invoice | Record purchase & input tax, revenue unchanged |
| No document | Not advisable | Compliance risk, mismatches in GST returns |

---

### Final suggestion:

* For returns beyond credit note period, **ask your customer to issue invoice for return**.

* Record as purchase and take input credit.

* Maintain full documentation.

* Avoid overstating revenue.

---

If you want, I can help you draft sample entries or GST return treatment for these cases. Would that help?

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now