Govt Clarifies Availability of Input Tax Credit on Return of Expired/ Damaged Medicines [Read Clarification]

While clarifying the impact of Goods and Services Tax (GST) on pharmaceutical products, the GST Policy wing working under the Finance Ministry has clarified that return of damaged or expired medicnes would be treated as return of goods and not as supply. It was further clarified that in such cases, input tax can be adjusted if the credit note was issued within the time prescribed under the Act.

While considering a representation made by the assessee, Shri D.G. Shah, Secretary General, Indian Pharmaceutical Alliance, the Joint Commissioner, GST, clarified that “Return on expired/damaged goods from distributor to the manufacturer will be treated as return of goods and not as supply. A credit note may be issued at the time of return of expired/damaged goods. Further, under section 34 of CGST Act, 2017 there is no time limit for issuance of credit note. However, the tax liability can be adjusted if the details of the same are declared by September following the end of the financial year. Thus, in case the credit note is issued after the specified time period, the tax liability would not be adjusted and the burden would have to be borne by the supplier.”

“With respect to whether industry would be required to reverse input tax credit on the medicines so destroyed as per Section 17(5)(h) of the CGST Act, ITC taken on such expired/damaged medicines will have to be reversed,” the Joint Commissioner said.