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TMI BlogGoods return by Tax InvoiceX X X X Extracts X X X X X X X X Extracts X X X X ..... Goods return by Tax Invoice X X X X Extracts X X X X X X X X Extracts X X X X ..... GSTR-2B and reducing our ITC. This poses Net ITC Mismatch and a lot of reconciliation issues. Please advise any remedy. Thanks in advance. Reply By Ganeshan Kalyani: The Reply: In GST, the supplier is permitted to issue credit note against his supply. So, the credit note issued by your supplier holds good. As a buyer while returning goods you issued tax invoice and it is incorrect. You may rais ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e a credit note to nullify the effect. Reply By Shri Sasikumar: The Reply: Sir, Then what should be the document we have to prepare to return the goods back to the supplier? Thanks. Reply By YAGAY andSUN: The Reply: You're absolutely right-this scenario often leads to a Net ITC (Input Tax Credit) mismatch, and it creates confusion during monthly reconciliations between GSTR-1, GSTR-2B, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GSTR-2B. Let's break down the issue and offer some remedies. ✅ Your Current Process: * You return material to the supplier and raise a Tax Invoice (Sales Return) from your end. * You report it in GSTR-1 under outward supplies. * The supplier issues a Credit Note for the same return. * The Credit Note shows up in your GSTR-2B, reducing your eligible ITC. * You now have both: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... * An outward supply (your Tax Invoice return), and * A reduction in ITC (from the supplier's Credit Note), causing double impact and reconciliation mismatch. 🔍 What's Going Wrong? The issue is that both parties are accounting for the same transaction, but differently: * You treat it as an outward supply (sale). * Supplier treats it as a purchase return (credit note). This du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plication distorts ITC, especially if the supplier's credit note is automatically reducing your eligible ITC in GSTR-2B. ✅ Recommended Remedies Option 1: Avoid Issuing a Tax Invoice for Returns * Instead of issuing a Tax Invoice, issue a Delivery Challan while returning goods to the supplier. * Let the supplier issue the Credit Note under Section 34 of CGST Act. * You acknowledge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and accept this Credit Note in your books. * This way, the transaction is captured only once in the supplier's GSTR-1 and your GSTR-2B. 📌 Why this works: You avoid double reporting. The Credit Note is enough to reverse the ITC in your books without needing to show a corresponding outward supply. Option 2: Use Debit Note/Credit Note Appropriately If the nature of return requires a Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Invoice (e.g., for rejected materials sold on high-seas basis, or value adjustments), then: * Communicate clearly with the supplier to not issue a Credit Note, or * Treat your invoice as a debit note to the supplier and ask them to acknowledge that in their books without issuing a separate credit note. * Align your accounting entries to match the supplier's credit/debit notes. Option 3: Mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tual Agreement and SOP * Establish a Standard Operating Procedure (SOP) with your suppliers for how material returns should be handled. * Decide who will document the return, and how (Tax Invoice vs Credit Note vs Delivery Challan). * This avoids duplication and makes reconciliation seamless. Option 4: Communication & Documentation * Keep a record of which returns you've raised tax invoic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es for and communicate with the supplier to not issue a Credit Note in such cases. * Alternatively, ask them to issue Credit Notes only when no Tax Invoice is raised by you. ✍️ Suggested Ideal Flow (Best Practice) Action Document Type GSTR Impact Return of goods Delivery Challan No GSTR-1 entry Supplier's response Credit Note (GSTN) Shows in your GSTR-2B ITC Reversal Man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ual in GSTR-2B Matches 2B data ⚠️ Compliance Tip: Make sure the supplier issues the credit note within the prescribed time limits, or else the ITC reversal might not reflect in the correct tax period. Reply By RaamSrinivasan Kalpathi: The Reply: This is a everyday problem being faced by the accounts department. As correctly advised by respected Shri.Ganeshanji for goods ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urn please send the goods under cover of delivery challan and ask for a credit note from the supplier. In the unlikely event you have issued a tax invoice and the supplier has also issued a credit note, you may nullify the tax invoice with credit note and if that is not acceptable, you may reject the credit note issued by the supplier in the IMS portal. This will automatically negate t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he credit note issued by the supplier. Nevertheless, please keep this as the final option. Also, one sage advice. With the advent of GST a supplier is no more a supplier. One has to work with them as equal partners, much akin to us working as partners with our valued customers. Reply By Shilpi Jain: The Reply: Before you issuing invoice or supplier issuing CN, pls discuss and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agree upon one of the modes. Either what you have done should be done or what the supplier has done should be done.
You guys cannot do both which will lead to reco issues. X X X X Extracts X X X X X X X X Extracts X X X X
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