GST : Return of Time Expired Goods

CBIC had issued a Circular No.72/46/2018-GST dated 26th October, 2018, stating the procedures to be followed when time expired drugs and medicines are returned back to manufacturer through supply chain. In the circular, two options/procedures are given. The same are:

1. Return of the Time Expired Goods to be treated as fresh supply
2. Return of time expired goods using credit note

The two options are discussed below:

1. Return of the Time Expired Goods to be treated as fresh supply

In case the goods returned is destroyed by the manufacturer, the manufacturer is required to reverse the Input tax Credit (ITC ) availed on the return supply. ITC that need to be reversed in such scenario is the ITC availed on return supply and not ITC that is attributable to manufacture of such expired goods.

Illustration: Supposedly, manufacturer has availed ITC of Rs. 10/- at the time of manufacture of medicines valued at Rs. 100/-. At the time of return of such medicine on the account of expiry, the ITC available to the manufacturer on the basis of fresh invoice issued by wholesaler is Rs. 15/-. So, when the time expired goods are destroyed by the manufacturer he would be required to reverse ITC of Rs. 15/- and not of Rs. 10/-.

1. Return of time expired goods by issuing credit note

As per sub-section (1) of Section 34 of the CGST Act the supplier can issue a credit note where the goods are returned back by the recipient. Thus, the manufacturer or the wholesaler who has supplied the goods to the wholesaler or retailer, as the case may be, has the option to issue a credit note in relation to the time expired goods returned by the wholesaler or retailer, as the case may be. As per law, there is no time limit for issuing of Credit Note. But, when it comes to adjustment of tax liability, the following scenarios may arise:

It is also clarified that, the circular will be applicable to other scenarios, where the goods are returned on account of reasons other than return of expired goods.

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