Manufacturing date and Expiry date play a very important role while buying a product because it shows when the product was manufactured and when it is going to be expired.
Almost everyone checks the expiry date of the product let that be household products or medicines. The Medicines or Drugs are sold in a process i.e.
Manufacturer -> Wholesaler -> Retailer -> Customer
If tax is levied on the goods, then the documents which are furnished in all these transactions are ‘Tax Invoice’ or else it is ‘Bill of Supply’.
But it has also happened that the medicines or drugs touch the expiry date without being sold. In this case, the medicines are given back to the manufacturer via the supply chain.
Given below are the GST procedures that must be followed while returning back these expired drugs:
1. How Can One Return the Expired Goods Under GST?
Given below are the options that can be opted for by the Retailer or the wholesaler:-
| Options | Treating returned goods fresh supply |
| Issuing a credit note while returning the goods |
2. What are the Consequences if the Person Chooses the 1st Option- Treating Fresh Supply i.e. Sale?
There are three scenarios i.e. where –
- the goods are returned by Registered Person
Documents to be issued?
- Invoice & charge tax applicable (in case of exemption, bill of supply)
Value?
- To be taken what is shown on the invoice, on the basis of earlier supplied goods
Will the wholesaler/manufacturer get the credit?
- Eligible to avail ITC of the applicable tax (subjected to conditions for claiming ITC u/s 16 of CGST Act fulfilled.
- The goods are returned by the Composition dealer
Documents to Issue?
- Bill of supply
Value?
- Value to be taken as invoice including the goods supplied
Will the wholesaler/manufacturer gets the credit?
No ITC available
- The person returning the goods is not registered under GST
Document to issue?
- Issuance of Commercial documents without tax charging
Value?
- Value to be taken as invoice including the goods supplied
Will wholesaler/manufacturer gets credit?
- No ITC available as no tax charged
Given below are the three scenarios explained in details-
3. GST Condition, if the Wholesaler/retailer Return Back the Goods to the Manufacturer/ Wholesaler and Considered as Fresh Supply
The first that the manufacturer must do on receiving the expired goods is to destroy it.
- If the goods returned deemed as fresh supply, then it will be purchased for manufacturer/wholesaler.
- The manufacturer has to reverse the ITC which was utilized on the foods under section 17(5) (h) of the CGST Act. As the manufacturer destroys the goods so no ITC will be availed for it.
Read Also: Impact of GST (Goods and Services Tax) on Medicine Prices
Note: Reversed ITC considered as ITC availed on return supply and not the ITC considered to the producer of such time expired goods.
4. What are the Consequences if the Person opts the 2nd option- Return of Goods by Issuing Credit Note?
- The supplier of the medicines/drugs i.e. the manufacturer/wholesaler can issue the credit note for the expired goods which has been returned by the wholesaler/retailer if they want to do so.
- The retailer/wholesaler who returned the goods can do this by furnishing the delivery challan.
- The manufacturer can destroy the goods which are expired and can also reverse the Income Tax Credit “Attributable” for such goods.
5. Other Key Points to Remember if the 2nd Option is Selected.
Given below are the other key points that must be remembered to get the credit note:-
| In case a credit note issued for the goods returned, | |
| Issued in the time limit specified u/s 34(2) CGST act | Specified time limit lapses |
| Tax liability may be adjusted by the supplier | The credit note can be issued by the supplier |
| In case of the receivers avails, it has to be reversed the goods received | Tax liability cannot be adjusted by the supplier |
| – | If the credit note is issued after the time period lapse, there is no need to declare credit note on the portal by the supplier as tax liability cannot be adjusted |
