GST return and credit not and invalid gstin

Hey Ganesh! This is a tricky but not uncommon situation.

Scenario Recap:

• You supplied goods in Aug 2017.

• The buyer returned the goods in March 2023 but never paid you.

• You issued a credit note for the return.

• The buyer’s GSTIN is now invalid (probably cancelled due to no business).

• You want to know how to handle this in your GST returns and claim back the CGST & SGST you paid earlier.

What you can do:

1. Issuing Credit Note

• You did the right thing by issuing a credit note to adjust the original supply.

• The credit note should reduce your output tax liability for the relevant period (March 2023 in your case).

2. Filing GST Return

• Since the buyer’s GSTIN is invalid now, you cannot report the credit note against a valid GSTIN in the normal way.

• However, you still need to report the credit note in your GSTR-1 (outward supplies) for the period when you issued the credit note (March 2023).

• In Table 9 (Credit Notes/Debit Notes) of GSTR-1, you must enter the details with the buyer’s GSTIN (even if invalid).

• Your GST portal might accept the entry, but some systems may throw a warning or error due to invalid GSTIN.

3. Claiming Refund / Adjustment of Taxes

• Since the buyer did not pay, and you returned the goods, you can adjust your GST liability by reducing output tax with the credit note.

• This adjustment reflects as reduction in your net GST payable.

• You cannot claim a refund of CGST/SGST already paid earlier on the original supply. Instead, the credit note reduces your future GST liability.

4. If GST Portal Rejects the Invalid GSTIN

• If the system does not allow reporting credit notes against an invalid GSTIN, you should:

  • File a manual rectification with your jurisdictional GST officer.

  • Explain the situation with supporting documents (original invoice, credit note, communication).

  • Seek their approval for the adjustment.

5. Important Notes

• Keep proper documentation of goods return and credit note for audit purposes.

• The time gap between supply and return is large but still allowable under GST law.

• Maintain all correspondence showing buyer defaulted on payment.

Summary: