As per Section 31(7) of the CGST Act,2017 in case of sale of goods on approval or return basis the invoice is required to be issued before or at the time of supply viz convey of approval by the recipient or six months from the date of removal whichever is earlier.
Above Section plays in critical role in determining the time of supply and thus eventually determining the due date of payment of GST on such supply of goods, in view of fact that as per Section 12 (2) of the CGST Act, 2017, the time of supply of goods is date of issue of invoice by the supplier or last date on which he is required to issue the invoice with respect to the supply. We all know that advance payments towards goods are not subject to GST in view of specific dispensation.
Due to COVID-19 pandemic, vide Notification No. 35/2020-Central Tax, dated 03.04.2020 as amended vide Notification No. 55/2020 dated the 27.06.2020 the compliances which were due from 20.03.2020 to 30.08.2020 were extended till 31.08.2020.
Accordingly in cases of sale of goods on approval or return basis in cases where the approval is conveyed by recipient or period of six months from date of removal was falling between 20.03.2020 to 30.08.2020, the supplier of such goods could have issued invoice on 31.08.2020 and time of supply of such goods would be treated such date.
This will result in deferment of the payment of GST resulting in relief to the supplier of such goods.
In this regard it is submitted that vide Notification No 65/2020-Central Tax dated 01.09.2020 the compliance benefit was further extended but same was restricted only to Section 171 (anti profiteering provisions) wherein the due date of compliance which falls during the period from “20.03.2020 to 29.11.2020” was extended till 30.11.2020
Relief granted in regard to sale of goods on approval or return basis by Notification No. 66/2020- Central Tax dated 21.09.2020
By issuing Notification No. 66/2020- Central Tax dated 21.09.2020 following proviso has been inserted in in the first paragraph, in clause (i) of Notification No. 35/2020-Central Tax, dated 03.04.2020.
“Provided further that where, any time limit for completion or compliance of any action, by any
person, has been specified in, or prescribed or notified under sub-section (7) of section 31 of the
said Act in respect of goods being sent or taken out of India on approval for sale or return, which
falls during the period from the 20th day of March, 2020 to the 30th day of October, 2020, and
where completion or compliance of such action has not been made within such time, then, the
time limit for completion or compliance of such action, shall stand extended up to the 31st day
of October, 2020.”.
The issuance of above Notification means that in case the due date of issue of invoice in respect of sale of goods on approval or return basis as per Section 31(7) of the CGST Act,2017 is falling from 20.03.2020 to 30.10.2020, same will shall be extended to 31.10.2020, meaning thereby the invoice can be issued by the supplier in such cases on 31.10.2020 and payment of tax can be made accordingly.
It is important to note here that the above benefit is available only for goods being sent or taken out of India on approval for sale or return. This means the benefit would not be available to goods sent on approval or return basis , within India.
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Frah Saeed is a law graduate specializing in the core field of indirect taxes and is the Co-founder of taxwallah.com. She has authored many publications on GST and is into full-time consultancy on GST to big corporates. She as a part of taxwallah.com heads a team comprising of Chartered Accountants and Advocates and plays a key role in our mission to disseminate GST knowledge to all.
