Tax on Goods returned after GST

It is a common practice in business to return goods once sold, back to the seller. Under the current tax regime, the value of returned goods is reduced from the amount of turnover and taxes already paid at the time of removal on the subject goods are reversed.

Tax on Goods Return after GST has been dealt with in detail along with provisions for refunds and tax payable depending on the type of goods returned by a registered taxpayer or unregistered taxpayer. The subject goods may be goods on which duty has been paid, or exempted goods being returned by a registered or an unregistered taxable person.

So, if the

1. goods were removed/sold within 6 months prior to the appointed day
2. returned within 6 months from the appointed day, and
3. the proper officer can satisfactorily identify the goods

then the tax will be calculated as follows:

Conditions satisfied:
removed/ sold within 6 months	returned within 6 months	identifiable goods

1.) Duty paid Goods returned

2.) Goods earlier exempt, now GST levy

1.1) Returned by a taxable person- DEEMED SUPPLY
1.2) Returned by unregistered person- REFUND OF DUTY	2.1) NO tax is payable by the person returning the goods

When duty paid Goods are returned by Registered Taxable Person

Duty paid goods returned by a registered taxpayer will be treated as ‘Deemed Supply’ and tax has to be paid on this by the person returning the goods. This is because the goods were sold before GST, allowing the buyer to claim input tax credit on the tax paid while discharging output tax liability, or to carry forward the input tax credit under GST. The seller, however, will not have been allowed input tax credits in the old regime.

When such goods are returned, GST will be discharged by the person returning the goods. The tax paid will be allowed as input tax credit to the original seller of such goods thus eliminating loss.

When duty paid Goods are returned by Unregistered Taxable Person

The seller of such goods will be allowed refund of tax paid at the time of original sale if the following conditions are satisfied:

1. the goods were removed/sold within 6 months prior to the appointed day
2. said goods were returned within 6 months from the appointed day

However, no such conditions have been prescribed for return of exempted goods by unregistered taxable person.

Return of Exempted Goods

1.) Registered Taxpayer

2.) Unregistered Taxpayer

1.1) NO Tax

2.1) NO Tax

1.2) Conditions satisfied: a) removed/ sold within 6 months b) returned within 6 months c) identifiable goods

2.2) No Conditions applied

Hence, tax on goods return after GST depends majorly on the type of goods returned i.e. duty paid or exempted goods, timing of such return i.e. removed within 6 months and/ or returned with 6 months and the tax title of person returning the goods i.e. registered taxable person or unregistered taxable person.