{"id":29536,"date":"2021-04-30T14:45:12","date_gmt":"2021-04-30T09:15:12","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=29536"},"modified":"2021-06-04T17:15:56","modified_gmt":"2021-06-04T11:45:56","slug":"goods-sent-on-approval-basis-before-transition-to-gst","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/goods-sent-on-approval-basis-before-transition-to-gst\/","title":{"rendered":"Goods Sent on Approval Basis before Transition to GST"},"content":{"rendered":"\n<p class=\"has-drop-cap\">It is a common business process to\nsend goods on approval basis. Hence, many times these goods are returned by the\nreceiver of such goods due to various reasons. But sometimes the dealer\nsupplies his goods on the approval basis where the customers are given the\noption either to keep such goods or return them in a specified time period. <\/p>\n\n\n\n<p>Hence, the taxpayers are interested in knowing about the transition of such transactions from old laws to the Goods and Service Tax laws.\u00a0The provision of transition as given under Chapter XX of CGST Act, 2017\u00a0gives information with reference to the handling of various transactions under <a href=\"https:\/\/corpbiz.io\/gst-registration\"><strong>Goods and services tax<\/strong><\/a>. In this article, we will cover treatment of goods sent on approval basis before the transition to GST.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/goods-sent-on-approval-basis-before-transition-to-gst\/#Transition_Provision_under_GST\" >Transition Provision under GST<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/goods-sent-on-approval-basis-before-transition-to-gst\/#Certain_Situations_during_the_Transition_to_GST_Phase\" >Certain Situations\nduring the Transition to GST Phase<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/goods-sent-on-approval-basis-before-transition-to-gst\/#Invoice_on_Goods_being_sent_on_Approval_for_Sale\" >Invoice on\nGoods being sent on Approval for Sale<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/goods-sent-on-approval-basis-before-transition-to-gst\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Transition_Provision_under_GST\"><\/span>Transition Provision under GST<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>With the introduction of GST on\n1st&nbsp;July 2017, the businesses are concerned about the taxability of goods that\nare sent on an approval basis before the advent of GST and returned after\n1st&nbsp;July. GST is a noteworthy reform of our country in\nthe domain of indirect taxes. All the multiple taxes charged and levied by the\nCentre and States have been placed under one tax that is called Goods and\nServices Tax (GST). <\/p>\n\n\n\n<p>GST acts as multi-purpose value added tax and has consolidated various taxes into one. Hence, it was very important to have a transitional provision to make sure that the process of transition to GST regime is very smooth and seamless with no loss to the benefit of input tax credit earned in the existing regime. <\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/new-gst-registration-in-just-few-steps\/\">Get Your New GST Registration in Just Few Steps<\/a><\/mark><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Categories of Transition to GST Provisions<\/h3>\n\n\n\n<p><em><strong>The categories of transition to GST provisions can be divided into three heads:-<\/strong><\/em><\/p>\n\n\n\n<ul><li>Input <em><strong>tax credit<\/strong><\/em><sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/Tax_credit\"><em><strong>[1]<\/strong><\/em><\/a><\/sup><\/li><li>Continuing the existing procedures for a reasonable period without any undesirable outcome under GST law.<\/li><li>All claims including both the pending as well as future relating to the existing law that is filed before on or subsequent to the appointed day.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Certain_Situations_during_the_Transition_to_GST_Phase\"><\/span>Certain Situations\nduring the Transition to GST Phase<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>There are various situations such as receiving of goods after appointed day, return of sold goods, amends in the price of goods or services can happen during the transition to GST phase. Few of them are as given below:-<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" width=\"1000\" height=\"599\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/04\/Certain-Situations-during-the-Transition-to-GST-Phase-1.png\" alt=\"Certain Situations during the Transition to GST Phase\" class=\"wp-image-29551\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/04\/Certain-Situations-during-the-Transition-to-GST-Phase-1.png 1000w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/04\/Certain-Situations-during-the-Transition-to-GST-Phase-1-300x180.png 300w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/04\/Certain-Situations-during-the-Transition-to-GST-Phase-1-768x460.png 768w\" sizes=\"(max-width: 1000px) 100vw, 1000px\" \/><\/figure><\/div>\n\n\n\n<h3 class=\"wp-block-heading\">Goods Purchased\nDuring Existing Tax Regime but Received After Appointed Day<\/h3>\n\n\n\n<p>Under\nsection 140(1) of the GST Act only credit of the CENVAT\/VAT can be approved for\ncarrying forward to the GST regime which is claimed by a registered dealer in his\nlast return. This signifies that the ITC will only be allowed to be carried\nforward in case of the goods recorded and purchased in the books of accounts\nbefore the filing of last return.<\/p>\n\n\n\n<p>Hence,\nthe goods purchased for the period of the existing tax regime but were received\nafter the appointed date shall not be recorded in the books of accounts and will\nnot form the part of the last return and therefore the ITC on it will not be carried\nforward in the last return.<\/p>\n\n\n\n<p>Section\n140(5) of the Act comes into picture to solve this which provides that a\nregistered person shall be permitted to take the benefit of taxes and eligible\nduties in reference of the input received even subsequent to the appointed day\nbut where the taxes and duties on it have been already paid under the existing\nlaw depending on the condition that the said goods shall be recorded in the\naccount books within a period of 30days from the appointed day.<\/p>\n\n\n\n<p>Although,\nthe period of 30 days can be extended by the commissioner to further 30 days on\na sufficient cause under transition to GST.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Goods Returned\nAfter Appointed Day<\/h3>\n\n\n\n<p>Under\nthe present tax system if the goods are returned to the seller then the taxes\npaid on the said goods are reversed and the value of returned goods is deducted\nfrom the turnover amount. <\/p>\n\n\n\n<p>Moreover,\nthroughout the transition to GST phase, the return of goods shall be dependent on\nthe type of goods that are returned either by a registered or unregistered\nperson and also the goods are tax exempt or paid.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Return of\nGoods Sent of Approval Basis<\/h3>\n\n\n\n<p>This\nsection 142(12) of the GST Act specify the preconditions to be fulfilled in\norder to be eligible to be considered under transition to GST laws: Under this\nsection the provision is for goods that were sent on approval basis but not\nearlier than 6 months previous to the appointed day and are returned on the\nground of being rejected and not accepted by the buyer, therein no tax shall be\npaid if those goods are returned during the period of 6 months counting from\nthe appointed day. Moreover, the period of 6 months can be further extended to\ntwo months on giving sufficient cause to the commissioner.<\/p>\n\n\n\n<ul><li>If the goods are returned within specific period of 6 months, then it is not required to pay tax on such returned goods.<\/li><li>If the goods are not returned within the specific period of 6 months,      then both the seller and buyer who are returning such goods shall be liable to pay the required tax on such returned goods.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Invoice_on_Goods_being_sent_on_Approval_for_Sale\"><\/span>Invoice on\nGoods being sent on Approval for Sale<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><em><strong>The invoice under transition to GST must be issued with respect to goods that are sent on approval either:-<\/strong><\/em><\/p>\n\n\n\n<ul><li>Earlier than or during the time of supply or<\/li><li>Within 6 months from the date when the goods where removed from factory (before supply), whichever is earlier.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>It is very important to understand the transition provisions as they are highly significant and shall help in the easy and seamless transition to the new&nbsp;GST Regime. After the new GST implementation, the businesses are concerned on the subject of taxability of goods that are sent on approval basis before the transition to GST and the returned goods after its implementation. Therefore, it is clear that goods sent on the basis of approval shall be returned within 6 months from GST Implementation. <a href=\"https:\/\/corpbiz.io\/\"><strong>Corpbiz<\/strong><\/a> has a team of expert to solve your query regarding GST or related laws.  <\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/cancellation-gst-registration-in-india\/\">Cancellation of GST Registration in India: Full guide<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>It is a common business process to send goods on approval basis. Hence, many times these goods are returned by the receiver of such goods due to various reasons. But sometimes the dealer supplies his goods on the approval basis where the customers are given the option either to keep such goods or return them [&hellip;]<\/p>\n","protected":false},"author":33,"featured_media":29553,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[16],"tags":[1702],"acf":{"service_id":"334"},"authorName":"Kandarp Vanita","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/02\/image_2021_02_01T09_09_44_024Z.png","authorDescription":"Kandarp Vanita has done masters in Corporate and Commercial Law from WB National University of Juridical Sciences. She has 3 yrs of experience in drafting legal documents &amp; dissertations. Being a curious reader, she is also passionately into providing legal backups and comprehensive understandings in every aspect of Law to the firms.","postViews":6226,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/29536"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/33"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=29536"}],"version-history":[{"count":12,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/29536\/revisions"}],"predecessor-version":[{"id":31503,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/29536\/revisions\/31503"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/29553"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=29536"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=29536"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=29536"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}