Tax impact on goods sold bfr gst & sales rejection after gst

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

02 May 2018 Dear Sir,
Pls tell me what will be the entry for goods sold before GST & sales rejection after GST.
Party issued us Rejection Note with Excise Duty & CST charged.
Whether to accept Exceise rejection note after Jul'17? & If yes how to take Its entry of this type of Rejection Note in accounting?
Pls suggest urgently.

Guest

Guest (Expert)

02 May 2018 See this video to understand the impact of this transaction https://youtu.be/smhzufhQFG4

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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26 July 2025 This is a common issue when transactions span the GST rollout period (July 1, 2017).

### Key points:

* **Goods sold before GST (pre-July 2017)** were subject to **Excise Duty and CST**.
* **Goods rejected after GST rollout (post-July 2017)** means the rejection note may still mention Excise Duty and CST, but these taxes are now replaced by GST.
* **Whether to accept Excise rejection note after July 2017?**
Technically, **excise duty is abolished from July 1, 2017**, so rejection notes mentioning excise duty after this date are inconsistent with the law. However, the rejection relates to goods sold before GST, so it’s a reversal of a pre-GST sale.

### How to treat such rejection notes:

1. **Accept the rejection note** as it pertains to the original sale which was pre-GST.

2. Record reversal entries for the sale including the **Excise Duty and CST components** as per the original invoice.

3. **Accounting entry for rejection:**

* Debit Sales Returns (or Sales Account)
* Debit Excise Duty Payable (reverse excise duty portion)
* Debit CST Payable (reverse CST portion)
* Credit Debtor/Party Account (reduce amount receivable from party)

4. Since rejection is post-GST, do **not apply GST** on the rejection note.

### Summary:

* Accept the rejection note but reverse the transaction on **Excise & CST basis only** (no GST applicable).
* Make sure you maintain proper documentation to justify these entries in case of audits.
* Confirm with your tax advisor if your company is maintaining dual accounting for pre & post GST periods.

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