Return of Expired Drugs/Medicins :Accounting Treatment (By Mr. Narendra Sharma)

Narendra Sharma
M : 9415127075
Durga Prasad
M : 9235718726
9/76, Arya Nagar, Kanpur
                                                                                                                                                e-mail :


EXTRACT OF CIRCULAR NO. 72/46/2018 DATED 26/10/2018
Option to follow Method ‘A’ or ‘B’

Method (A):

(a)  A registered person returning expired drugs/medicines may treat it as fresh supply, issue an invoice captioned as return supply.  The value of goods in this invoice should be same as was at the time of supply.  The wholesaler or manufacturer on receipt of such return supply may take credit of ITC on the tax liability subject to provisions of Section 16 of CGST Act.

(b) A composition tax payer in case of return of expired medicines/drugs may issue a bill of supply and pay tax at the rate applicable on such composition tax payer.  The recipient of such return goods will not be entitled to claim ITC.

(c) If person returning time expired goods is unregistered, he can return the goods by issuing any commercial documents without charging any tax.

(d) Where manufacturer or wholesaler destroyed time expired goodsITC  may be reversed on the return supply as per Section 17(5)(h) of CGST Act.  The amount of ITC will be the ITC availed on return supply.


ITC availed Rs. 10/-

On return of goods

If ITC is Rs. 15/- manufacturer entitled for the same

  Method (B):


(A) By issuing credit note as per Section 34 (1) of CGST Act, the supplier can issue a credit note where goods are returned back by the recipient.  Similarly, the manufacturer or wholesaler may also issue credit note as the same may be. In this case a delivery challan should accompany along with the goods related to retailer or wholesaler.  For the purpose of accounting there is no time limit to issue credit note.  However, adjustment of tax liability on the basis of credit note will be in accordance with the prescribed law.

(B) If credit note is issued within the time limit of Section 34 (2) of CGST Act, the tax liability may be adjusted by the supplier, but only when person returning the time expired goods has either not availed the ITC or if availed has revered the ITC so availed against the goods being returned.

(c) In case of expiry of time limit as per Section 34(2) a credit note may be issued by the supplier for such return of goods, but without adjusting tax liability at his end.

(d) However, where time expired goods are destroyed by the manufacturer, he may reverse the ITC as per the provisions of Section 17(5) of CGST Act as below:-


Date of supply of goods from manufacturer- wholesaler /retailer.

Date of return of time expired goods from retailer wholesaler/

Treatment in terms of tax liability and credit note.

Case 1

1st July, 2017

20th September, 2018

Credit note will be issued by the 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.

Case 2

1st July, 2017

20th October, 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.

Notes: In similar circumstances this formula is applicable in other cases also, such as, Food Article or any Article where expiry date is mentioned.

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