Documents for Return of under warranty defective goods to supplier

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PS Kalyan

7 Points Posted on 16 January 2023

1. A registered dealer say M/S ABC in West Bengal purchases vehicle batteries from a manufacturer say M/S XYZ based and registered in Haryana. The GST rate is 28%. These batteries are covered under warranty for 6 to 12 months for any defects during warranty period.
2. M/S ABC sells these to various dealers both Registered and Unregistered in West Bengal. These dealers in turn sell batteries to end users in retail. Sales Invoices are issued in the process.
3. If end users find a product defective, they return to respective dealers from whom they purchased the product. These dealers return such defective products to M/S ABC
4. Now after a certain period M/S ABC has reasonable quantity of defective batteries returned by dealers. They need to send these back to manufacture M/S XYZ in Haryana. Upon receipt and verification M/S XYZ will send fresh batteries as replacement.

Now question is

A. What sort of documents are required to be sent by M/S ABC with truck to M/S XYZ. Purchase Return/ Debit Note/ Challan and

B. What would be GST involvement in this consignment? Chargeable or not?
C. Same question as above points A and B when manufacturer returns fresh goods back to M/S ABC

what are the latest applicable rules under GST Act.

Replies (7)

Aisha

Finance Professional

9489 Points Posted on 17 January 2023

A. In order to return the defective batteries to the manufacturer M/S XYZ, M/S ABC would need to send a purchase return invoice or debit note along with a challan for the returned goods. These documents would serve as proof of the return transaction and would be required for GST compliance.

B. As per the GST Act, returns of goods are not chargeable to GST. Therefore, when M/S ABC returns the defective batteries to the manufacturer M/S XYZ, they would not be required to pay GST on the returned goods.

C. When the manufacturer M/S XYZ returns fresh batteries as replacement to M/S ABC, they would need to issue a sales return invoice or credit note along with a challan for the returned goods. These documents would serve as proof of the return transaction and would be required for GST compliance. Similarly, as per the GST Act, returns of goods are not chargeable to GST. Therefore, M/S ABC would not be required to pay GST on the returned goods from the manufacturer M/S XYZ.

PS Kalyan

7 Points Posted on 17 January 2023

Thank you very much for the reply. If Purchase Return Invoice / Debit Note is raised for the quantity to be returned then only name of the items and quantity is to be mentioned in these documents. Right? The Rate and Amount column should be left blank? Is it so! Clarification would be highly appreciated.

Aisha

Finance Professional

9489 Points Posted on 17 January 2023

Yes, that is correct. When a Purchase Return Invoice or Debit Note is raised for the quantity of goods being returned, only the name of the items and the quantity being returned should be mentioned in the document.

Pankaj Rawat

GST Practitioner

55067 Points Posted on 17 January 2023

Dear P.S Kalyan
First of All as per Rule Section 34 of CGST Act R/w Rule 53(1A) Of CGST Act , the Debit/Credit prescribed format , you cannot issue Debiit/Credit Note without putting amount therein.

Now come to your Query, the batteries are under Warranty Period & Being supplied under Replacement Agreement. so no consideration is involved. Hence need to supplied under Delivery Challan as prescribed under Rule 55.

Note : As per Rule 55(3) , need to prepare eway for every DC whose consignment value get exceeded 50K

PS Kalyan

7 Points Posted on 18 January 2023

Thank you very much for the reply.

PS Kalyan

7 Points Posted on 18 January 2023

Dear Sh Rawat

Thanks for your reply.
Would the manufacturer M/S XYZ also be able to send back fresh goods to Buyer M/S ABC in lieu of under warranty defective goods as replacement using Delivery Challan and e way bill without new Tax Invoice ?