How to reverse vat

You need to get a credit note from your party who has returned the goods mentioning the amount of excise and VAT. Also preserve the LR, Delivery Challan and any other proof that the goods have been returned.

CUSTOMER SAYING THAT HE HAS NOT TAKEN VAT CREDIT, SO IF HE HAS NOT TAKEN CREDIT THEN HOW HE CAN GIVE US CREDIT NOTE

Credit note has to be given as a proof that the party has returned the goods. If the goods have been returned within six months you can avail the tax benefit by paying VAT amount less amount of rejection. While returning goods it is mandatory for the party to issue a rejection note as a proof that the goods are returned. He is anyways not entitled to claim set-off if he has returned the goods but the amount has to be seperatley mentione don the note so that the tax paid can be reversed. If it is not done then the ledger account will show the VAT amount as outstanding.

Entries to be Passed by you:

On Sales

Debtors   Dr.

    To Sales

    To Excise

    To VAT

On return

Sales Goods Returned Dr

Excise Goods Returned Dr

VAT Goods Returned Dr

    To Debtors

Entries by the corresponding Party

On Purchase by them:

Purchase Dr

Excise    Dr

VAT       Dr

     To Creditors

On return :

Creditors Dr

     To Purchase Goods Returned

     To Excise Goods Returned

     To VAT Goods Returned

The above entries are essential to square off the transaction.