Tax Invoice, Credit and Debit Notes – CA Final IDT Study Material is designed strictly as per the latest syllabus and exam pattern.
Tax Invoice, Credit and Debit Notes – CA Final IDT Study Material
Question 1.
Discuss the provisions relating to issue of an invoice/document in the following circumstances:
(i) Advance payment is received against a supply, but subsequently no supplies are made.
(ii) Goods are sent on approval for sale or return and are removed before the supply takes place.
(iii) Malcolm provides continuous supply of services to his client, where the due date of payment for such services is not ascertainable. No advance has been received in this behalf. [May 2018, (Old), 4 Marks]
Answer:
(i) Receipt Voucher& Refund Voucher [section 31(3)(e) of CGSTAct, 2017]
- Where advance payment is received against a supply for which receipt voucher has been issued
- but subsequently no supplies are made and
- no tax invoice is issued in pursuance thereof
- a refund voucher has to be issued to the person who had made the advance payment.
(ii) Sale on approval Basis[section 31(7) of CGST Act, 2017]
- Where the goods are sent on approval for sale or return
- and are removed before the supply takes place
- the invoice shall he issued
- before or at the time of supply
- or 6 months from the date of removal whichever is earlier.
(iii) Continuous Supply of Service & Due Date of Payment is not Ascertainable [section 31(5)(b) of CGST Act, 2017]
- In case of continuous supply of services
- where the due date of payment is not ascertainable from the contract
- the invoice shall be issued
- before or
- at the time when the supplier of service receives the payment.
Examiner’s Comment
The question requires the examinees to discuss the provisions relating to issue of an invoice/ document in the various circumstances. Most of the examinees were found to be ignorant of the provisions pertaining to section 31 of COST Act, 2017 and thereby mentioned wrong answers.
Question 2.
MBM Caretakers, a registered person, provides the services of repair and maintenance of electrical appliances. On April 1, it has entered into an annual maintenance contract with P for its Air Conditioner and Washing Machine. As per the terms of contract, maintenance services will be provided on the first day of each quarter of the relevant financial year and payment for the same will also be due on the date on which service is rendered. During the year, it provided the services on April 1, July 1, October 1, and January 1 in accordance with the terms of contract. When should MBM Caretakers issue the invoice for the services rendered?
Answer:
Statutory Provision
(i) Continuous supply of service means, interalia, supply of any service which is provided, or agreed to be provided continuously or on recurrent basis, under a contract, for a period exceeding 3 months with the periodic payment obligations.
(ii) In terms of section 31, in case of continuous supply of service, where due date of payment is ascertainable from the contract (as in the given case), invoice shall be issued on or before the due date of payment.
In the given case
(i)
- The given situation is a case of continuous supply of service
- as repair and maintenance services have been provided by MBM Caretakers on a quarterly basis
- under a contract
- for a period of one year with the obligation for quarterly payment.
(ii)
- In the given case, MBM Caretakers should issue
- quarterly invoices
- on or before
- April 1, July 1, October 1, and January
Question 3.
Rakesh Industries Ltd., Mumbai entered Into a contract with Mukesh Ltd., Mumbai for supply of spare parts of a machine on 7th October. The spare parts were to be delivered on 31st October. Rakesh Industries Ltd. removed the finished spare parts from Its factory on 30th October. Determine the date by which invoice must be issued by Rakesh Industries Ltd. under GST law.
Answer:
As per Section 31, invoice shall be issued before or at the time of removal of goods for supply to the recipient, where the supply involves movement of goods.
In the given case, the invoice must be issued on or before 30th October.
Question 4.
Jai, a registered supplier, runs a general store in Ludhiana, Punjab. Some of the goods sold by him are exempt whereas some are taxable. You are required to advise him on the following issues:
i. Whether Jai is required to issue a tax invoices in all cases, even if he is selling the goods to the end consumers?
ii. Jai sells some exempted as well as taxable goods valuing ₹5,000 to a school student. Is he mandatorily required to issue two separate GST documents?
iii. Jai wishes to know whether it’s necessary to show tax amount separately in the tax invoices issued to the customers. You are required to advise him. [MTP, May 2019]
Answer:
Statutory Provisions:
- As per section 31(1) of the CGST Act, 2017:- Every registered person supplying taxable goods is required to issue a ‘tax invoice’.
- Section 31(3) (c) of the CGST Act, 2017:- Every registered person supplying exempted goods is required to issue a bill of supply instead of tax invoice.
- Rule 46A of the CGST Rules, 2017:- A registered person supplying taxable as well as exempted goods or services or both to an unregistered person may issue a single ‘invoice- cum-bill of supply’ for all such supplies.
As per section 31(3)(b) of the CGST Act, 2017 read with rule 46 of the CGST Rules, 2017:- A registered person may not issue a tax invoice if:
- value of the goods supplied < ₹ 200,
- the recipient is unregistered; and
- the recipient does not require such invoice.
Instead, such registered person shall issue a Consolidated Tax Invoice for such supplies at the close of each day in respect of all such supplies.
In the given case:
(i) No, he is not required to issue tax invoice in all cases.
(ii) There is no need to issue a tax invoice and a bill of supply separately to the school student in respect of supply of the taxable and exempted goods respectively [Rule 46A of the CGST Rules, 2017], A single “invoice-cum-bill of supply” may be issued for all such supplies.
(iii) As per section 33 of the CGST Act, 2017 read with rule 46(m) of the CGST Rules, 2017, where any supply is made for a consideration, every person who is liable to pay tax for such supply shall prominently indicate in all documents relating to assessment, tax invoice and other like documents, the amount of tax which shall form part of the price at which such supply is made. Hence, Jai has to show the tax amount separately in the tax invoices issued to customers.
Question 5.
X & Co. is a trader. It is registered under GST and has undertaken following sales during the day:
| Recipient of Supply | Amount (₹) |
| 1. R Traders – a registered retail dealer | 180 |
| 2. D Enterprises – an unregistered trader | 350 |
| 3. G – a Painter [unregistered] | 500 |
| 4. Aaditya Foundation Orphanage – an unregistered entity | 180 |
| 5. Mansi – a Student [unregistered] | 150 |
None of the recipients require a tax invoice [R Traders being a composition dealer]. Determine in respect of which of the above supplies, X & Co. may issue a Consolidated Tax Invoice instead of Tax Invoice at the end of the day?
Answer:
Statutory Provision:
As per section 31(3)(b) of the CGST Act, 2017 read with rule 46 of the CGST Rules, 2017:
A registered person may not issue a individual tax invoice if:
- value of the goods supplied <₹ 200,
- the recipient is unregistered; and
- the recipient does not require such invoice.
Instead, such registered person shall issue a Consolidated Tax Invoice for such supplies at the close of each day in respect of all such supplies.
In the given cases:
| Name of Recipient | Issue of Consolidated Invoice | Reason |
| Aaditya Foundation |
Yes | The value of goods supplied to these recipients is less than ₹ 200 as also these recipients are unregistered and don’t require a tax invoice. |
| Mansi | Yes | |
| R Traders | No | Although the value of goods supplied to it is less than ₹ 180 but R Traders is registered under GST. So, Consolidated Tax Invoice cannot be issued. |
| D Enterprises | No | Although both are unregistered but the value of goods supplied is not less than ₹ 200. |
Question 6.
Avtaar Enterprises, Kanpur started trading in Ayurvedic medicines from July ly 20XX. Its turnover exceeded ₹ 20 lakh on October 3, 20XX. The firm applied for registration on October 31, 20XX and was issued registration certificate on November 5, 20XX.
Examine whether any revised invoice can be issued in the given scenario. If the answer to th# first question is in affirmative, determine the period for which the revised invoices can be issued as also the last date upto which the same can be issued. [MTP, May/Nov. 2018, 4 Marks]
Answer:
Statutory Provision:
(a) As per section 31(3)(a) of the CGST Act:-
- A registered person may
- within one month from the date of issuance of certificate of registration
- issue a revised invoice against the invoice already issued
- during the period beginning with the effective date of registration till the date of issuance of certificate of registration to him.
(b) As per Rule 10(2) of CGST Rules
- the registration shall be effective
- from the date on which the person becomes liable to registration
- where the application for registration has been submitted
- within a period of 30 days from such date.
In the given cases:
- Avtaar Enterprises has applied for registration within 30 days of becoming liable for registration and the registration has been granted.
- Thus, the effective date of registration is the date on which Avtaar Enterprises became liable for registration i.e., October 3, 20XX.
- Therefore, since in the given case there is a time lag between the effective date of registration (October 3, 20XX) and the date of grant of certificate of registration (November 5,20XX), revised invoices can be issued.
- The same can be issued for supplies made during this intervening period i.e., for the period beginning with October 3, 20XX till November 5, 20XX.
- Further, the revised invoices can be issued for the said period till December 5, 20XX.
Question 7.
Following is the GST tax invoice issued by a registered Supplier.
M/S ABC Pvt. Ltd., Chennai
Date: 12-01-2019 GST No.: 33AXCCA1234MZU
| Purchaser: John Britto. Kochi | GST No. of purchaser: 31AAVPR6745JIZU | |
| Quantity(Nos.) | Value | |
| Ready-made shirts | 10,000 | 12,00,000 |
| IGST | 2,16,000 | |
| Total Amount | 14,16,000 | |
Being computer printout, no signature is required.
Identify any five mistakes or errors found in the above GST tax invoice.
Answer:
Following Mistakes are in Tax Invoice issued :
- Tax invoice does not contain the serial number
- Address of the supplier is missing
- GST Number of the supplier is incorrect
- Address of the purchaser is missing
- Rate per unit of the goods supplied is not given
- HSN/SAC of goods supplied not given
- Rate of GST not given
- Signature is required of authorised person of supplier.
Question 8.
An international trade exhibition is going to be held in United States of America in January. Aayaat Niryat Export House (ANEH) has participated in it. It intends to send 100 units of taxable goods manufactured by it to USA for display in the said exhibition.
ANEH is of the view that the activity of sending the goods out of India for exhibition is a zero-rated supply. However, its tax advisor does not concur with its view. Examine whether the view of ANEH is correct.
Assuming that ANEH could not sell any goods at the exhibition and brings back entire 100 units to India
- in February,
- in August,
Discuss the requirement to issue invoice, if any, in each of the above independent cases.
Would your answer be different if ANEH sells an aggregate of 65 units of the taxable goods in USA exhibition on different dates in January and remaining 35 units are brought back on 31st January. The tax advisor of ANEH advises ANEH that the export of 65 units qualify as zero-rated supply and it should apply for refund of the unutilized ITC in respect of the same. Examine the technical veracity of the tax advisor’s advice. [RTP May 2020]
Answer:
Statutory Provisions:
As per section 7 of the CGST Act, for any activity or transaction to be considered a supply, it must satisfy twin tests namely-
- it should be for a consideration by a person; and
- it should be in the course or furtherance of business.
The exceptions to the above are the activities enumerated in Schedule I of the CGST Act which are treated as supply even if made without consideration. Further, section 2(21) of the IGST Act defines “supply”, wherein it is clearly stated that it shall have the same meaning as assigned to it in section 7 of the CGST Act.
Section 16 of the IGST Act defines “zero rated supply” as any of the following supplies of goods or services or both, namely: –
(a) export of goods or services or both; or
(b) supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit.
Thus, only such “supplies” which are either “export” or are “supply to SEZ unit/developer” would qualify as zero-rated supply.
Circular No. 108/27/2019 GST dated 18.07.2019 clarified that the activity of sending/ taking the goods out of India for exhibition or on consignment basis for export promotion, except when such activity satisfy the tests laid down in Schedule I of the CGST Act, do not constitute supply as the said activity does not fall within the scope of section 7 of the CGST Act as there is no consideration at that point in time. Since such activity is not a supply, the same cannot be considered as “zero rated supply” as per the provisions contained in section 16 of the IGST Act.
The said circular further clarified that the activity of sending/taking goods out of India for exhibition is in the nature of “sale on approval basis” wherein the goods are sent/ taken outside India for the approval of the person located abroad and it is only when the said goods are approved that the actual supply from the exporter located in India to the importer located abroad takes place.
The activity of sending/taking specified goods is covered under the provisions of section 31 (7) of the CGST Act, 2017 read with rule 55 of CGST Rules, 2017. As per said provisions, in case of the goods being sent or taken on approval for sale, the invoice shall be issued before/at the time of supply or 6 months from the date of removal, whichever is earlier. The goods which are taken for supply on approval basis can be moved from the place of business of the registered supplier to another place within the same State or to a place outside the State on a delivery challan.
In the given case:
(a) Not zero rated: The view of ANEH that the activity of sending the goods out of India for exhibition is a zero-rated supply is not correct.
(b) No issue at the time of sending: ANEH is not required to issue invoice at the time of taking the goods out of India since the activity of merely sending/taking the taxable goods out of India is not a supply. However, the goods shall be accompanied with a delivery challan.
(c) Return of goods:
(i) In case the entire quantity of goods (100 units) sent to USA is not sold but brought back by ANEH in February, i.e. within the stipulated period of 6 months from the date of removal, no tax invoice is required to be issued as no supply has taken place in such a case.
(ii) In case, the entire quantity of goods (100 units) sent to USA is not sold and brought back by ANEH in August, i.e. after 6 months from the date of removal, a tax invoice is required to be issued for entire 100 units of taxable goods in accordance with the provisions contained in section 12 [determining time of supply of goods] and section 31 [tax invoice] of the CGST Act, 2017 read with rule 46 [tax invoice] of the CGST Rules, 2017 within the time period stipulated under section 31(7) of the CGST Act, 2017.
(iii) However, if an aggregate of 65 units of the goods are sold in USA exhibition by ANEH on different dates in January (i.e. within the stipulated period of 6 months), a tax invoice would be required to be issued for these units, at the time of each of these sales, in accordance with the provisions contained in section 12 and section 31 of the CGST Act read with rule 46 of the CGST Rules. When the goods are sold in exhibition, actual supply from the exporter in India to the importer located abroad takes place and this supply qualifies as export. Export of goods is a zero-rated supply in terms of section 16(1)(a) of the IGST Act, 2017.
(iv) If the remaining 35 units are brought back on 31st January, i.e. Within the stipulated period of 6 months from the date of removal, no tax invoice is required to be issued as no supply has taken place in such a case.
(v) Further, tax advisor’s advice is technically correct. Since the activity of sending/ taking specified goods out of India is not a zero-rated supply, execution of a bond/ Letter of Undertaking (LUT), as required under section 16 of the IGST Act, is not required.
(vi) However, the sender can prefer refund claim even when the specified goods were sent/taken out of India without execution of a bond/LUT, if he is otherwise eligible for refund as per the provisions contained in section 54(3) of the CGST Act, 2017 read with rule 89(4) of the CGST Rules, 2017 in respect of zero-rated supply of 65 units.
Question 9.
Explain the term ‘zero-rated supply’ as defined under IGST Act, 2017. How are zero-rated supplies different from exempt supplies made by a registered person in respect of issuance of invoice? [MTP, May 2018, 3 Marks]
Answer:
Zero rated supply means any of the following supplies of goods or services or both, namely : –
(a) export of goods or services or both; or
(b) supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone Unit [Section 2(23) of the IGST Act read with section 16 of the IGST Act].
A registered person supplying exempted goods or services or both shall issue a bill of supply in case of zero-rated supplies, normal tax invoice shall be issued.
Question 10.
Explain the provisions for return (Sales Return) time expired medicine drugs?
Answer:
- Where the time expired medicines/drugs (goods) returned by the retailer/ wholesaler as a fresh supply, are destroyed by the manufacturer
he/she is required to reverse the ITC availed on the return supply in terms of section I7(5)(h) of the CGST Act.
It is pertinent to mention here that the ITC which is required to be reversed in such scenario is the ITC availed on the return supply and not the ITC that is attributable to the manufacture of such time expired goods.
The clarification may also be applicable to return of goods for reasons other than being time expired. [Circular No. 72/46/2018 GST dated 26.10.2018].
Impact on tax invoice, credit note & bill of supply
In case of return of time expired medicines/drugs, either of the following two options can be followed:
(1) Return of time expired goods to be treated as fresh supply
In case the person returning the time expired goods is:
(i) A registered person (other than a composi-tion taxpayer)
- He may, at his option, return the said goods by treating it is as a fresh supply and thereby issuing an invoice for the same (“return supply”).
- The value of the said goods as shown in the invoice on the basis of which the goods were supplied earlier may be taken as the value of such return supply.
- The wholesaler/manufacturer, who is the recipient of such return supply, shall be eligible to avail ITC of the tax levied on the said return supply subject to the fulfilment of conditions specified in section 16 of the CGST Act.
(ii) A composition supplier
- He may return the said goods by issuing a bill of supply and pay tax at the rate applicable to a composition taxpayer.
- No ITC will be available to recipient of return supply.
(iii) An unregistered person
- He may return the said goods by issuing any commercial document without charging any tax on the same
(2) Return of time expired goods by issuing credit note
The manufacturer/wholesaler who has supplied the goods to the wholesaler/retailer has the option to issue a credit note in relation to the time expired goods returned.
If the credit note is issued within the specified time limit—
(i) September following the end of the financial year in which such supply was made, or
(ii) the date of furnishing of the relevant annual return, whichever is earlier; the tax liability may be adjusted by the supplier, subject to the condition that the person returning the time expired goods has either not availed the ITC or if availed has reversed the ITC so availed against the goods being returned.
- However, if said time limit has lapsed, a credit note may still be issued by the supplier for such return of goods but the tax liability cannot be adjusted by him in his hands.
- Where such returned time expired goods are destroyed by the manufacturer, he/ she is required to reverse the ITC attributable to the manufacture of such goods, in terms of section 17(5)(/z) of the CGST Act.
| DATE OF SUPPLY* | DATE OF RETURN** | TREATMENT IN TERMS OF TAX LIABILITY & CREDIT |
| 01.07.2017 | 20.09.2018 | Credit note will be issued by supplier (manufacturer/wholesaler) and the same to be uploaded by him on the common portal. Subsequently, tax liability can be adjusted by such supplier provided the recipient (wholesaler/retailer) has either not availed the ITC or if availed has reversed the ITC. |
| 01.07.2017 | 20.10.2018 | Credit note will be issued by the supplier (manufacturer/wholesaler) but there is no requirement to upload the same on the common portal. Subsequently tax liability cannot be adjusted by such supplier. |
* Of goods from manufacturer/wholesaler to wholesaler/retailer
** Of time expired goods from retailer/wholesaler to wholesaler/manufacturer
The clarification may also be applicable to return of goods for reasons other than being time expired.
[Circular No. 72/46/2018 GST dated 26.10.2018].