Legality of making a sale before purchase under gst/indian law

Regards

is it legal if i

  1. make a gst sale on 25 sept(example) to someone and pay tax for that while i don't already hold the sold stock/items/inventory.
  2. delivery the goods to the person next month after making purchase and claim itc also next month.
  3. so basically inventory for that specific item will be negative for that month closing. (not FY)

thanks

Replies (2)
Quick Summary
This discussion clarifies the legality of issuing a GST sale invoice and paying tax before receiving the actual stock. While it's permissible under GST law to raise an invoice and account for the tax liability when it arises, the buyer cannot claim Input Tax Credit (ITC) until they receive the goods. Furthermore, physically transferring inventory before it's acquired is not possible, meaning your stock cannot be negative.

Yes, you can go ahead.

As you are going to pay GST when the liability arises (Invoice is issued) and would claim ITC on purchases when you receive the goods, it is in compliance with the provisions of GST Act.

However, your customer can't claim the ITC in Sept month as he has not received the goods even though he is in possession of the invoice and tax has been paid.

You can make the sale but you cannot transfer material since you don't have it. Therefore inventory cannot be negative.

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