New
Published on:
February 25, 2023
By
Paramita

Goods Sent on Approval Basis before Transition to GST

Goods sent on approval by a supplier to a recipient before the implementation of GST in India are eligible for exemption from tax if certain conditions are met. GST is a value-added tax that replaced several other indirect taxes on goods and services in India. It is a one-nation-one-tax regime that simplifies the tax structure and reduces the cost of compliance.

Under the current GST regime, goods sent on approval basis are treated as deemed supplies and are subject to GST if the recipient fails to return the goods within a stipulated period. The GST Form to be submitted in such cases is GST ITC-04. In this article, we will discuss the rules related to Goods Sent on Approval Basis before Transition to GST and the GST Form that should be submitted in such cases.

Goods Sent on Approval Basis before Transition to GST

A supplier can send goods to a recipient on an approval basis before the implementation of GST. Goods sent on approval basis refer to goods that are sent by a supplier to a recipient for approval. The recipient can either accept or reject the goods within a stipulated period. If the recipient accepts the goods, then the sale is completed, and the supplier issues an invoice for the same. If the recipient rejects the goods, then the supplier takes back the goods, and there is no sale.

Goods sent on approval basis before the implementation of GST were not subject to any tax if certain conditions were met. The conditions for the same are as follows:

  • The goods were sent on an approval basis before the implementation of GST.
  • The goods were returned by the recipient within six months from the date of sending.
  • The goods were not sold or used by the recipient before their return.
  • The supplier had declared the stock of such goods in the GST return filed for the period immediately preceding the date of transition to GST.

If all the conditions mentioned above are met, then the supplier is exempt from paying any tax on the goods sent on approval basis before the implementation of GST.

GST Form to be Submitted on Goods Sent on Approval

Under the current GST regime, goods sent on approval basis are treated as deemed supplies and are subject to GST if the recipient fails to return the goods within six months from the date of sending. In such cases, the GST Form to be submitted is GST ITC-04.

GST ITC-04 is a form that is used to declare the details of inputs, semi-finished goods, finished goods, and capital goods sent to a job worker and received back from a job worker. The form is also used to declare the details of goods sent on approval basis that have not been returned within the stipulated period.

The due date for filing GST ITC-04 is the 25th day of the month following the end of the quarter for which the form is being filed. If the form is being filed for the quarter ending in March, the due date is the 30th of April of the following year.

Conclusion

Goods sent on approval basis before the implementation of GST are exempt from tax if certain conditions are met. If the recipient fails to return the goods within six months from the date of sending, the goods are treated as deemed supplies and are subject to GST. In such cases, the GST Form to be submitted is GST ITC-04.

It is essential for small and medium business owners and startup founders to understand the rules related to goods sent on approval basis before the implementation of GST and the GST Form that should be submitted in such cases. Compliance is critical to avoid penalties and fines.

Suggestions



Friendly GST Provisions For A Tax Payer
GSTR-1 PDF to EXCEL Extraction Tool: Streamlining GST Return Filing
Reverse Charge under GST on Transaction between Registered Unregistered Person

Updated on:
March 16, 2024