Guidance Required on Returning Defective Equipment Purchased Without ITC Claim

We are a hospital providing healthcare services, which are exempt from GST. On 31-01-2024, we purchased medical equipment worth ₹80,00,000/-. Since our services are exempt, we did not claim ITC on this purchase.

Unfortunately, the machine has turned out to be defective, and we are returning it to the supplier. The issue we are facing is:

  • The supplier says they cannot raise a credit note.

  • We also cannot raise a sales invoice for returning the equipment, as that would attract GST liability, which we would have to bear from our own funds.

  • Our intention is only to return the defective machine and obtain a full reimbursement, since the defect is on the supplier’s side.

Could you please advise the correct legal and GST-compliant procedure for returning the equipment and obtaining full reimbursement without incurring GST liability?

Replies (1)
  • Return the equipment using a delivery challan (not a sales invoice), clearly stating the reason for return (“defective equipment – return to supplier”).

  • Request the supplier to process the return and refund based on the delivery challan and the original purchase documentation.

  • Supplier can treat the return as a cancellation of the original outward supply (since no ITC was claimed and the buyer is not registered/exempt) and directly refund the invoice value.

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