Sales returns from registered customers for goods with an overseas place of supply
GST is destination based tax, that is, consumption tax, which means tax is levied where goods and services are consumed and accrue to that state. The supply of goods or services or both when the supplier is located in India and the place of supply is outside India shall be treated as a supply of goods or services or both in the course of inter-state trade or commerce.
A customer can require to return the goods or issue credit note due to various reasons like damaged goods, quality issues etc.
The following procedure illustrates a credit for services to a registered customer with an overseas place of supply.
Create a sales return order or credit memo
- [!INCLUDE [open-search](../../includes/open-search.md)] Enter Sales Return Orders or Sales Credit Memos, and then choose the related link.
- Select Customer on Sales Return Order or Sales Credit Memo header, GST customer type should be Registered.
- Select G/L Account on Sales Return Order or Sales Credit Memo line. GST Group Code, HSN/SAC Code shouldn't be blank on the G/L Account.
- POS Out of India field on Sales Return Order or Sales Credit Memo header should be marked as True.
The document must be open and marked as a GST Invoice. The location state and the customer's place-of-supply state must match. GST Place Of Supply on the lines can't be Location Address.
For example, there's a sales credit memo for INR 10,000 and 18% IGST has to be charged on the credit memo amount.
GST calculation appears in the Fact Box as following:
Component Amount GST Base Amount 10,000 IGST 1800 G/L entries for the credit note for services with an overseas place of supply are as follows:
Particulars Amount Service Account 10000 IGST Payable Account 1800 Customer Account -11800