There could be a situation where exempt goods or duty paid goods are returned after GST is implemented. In this situation, question arises what will be treatment of such goods?, whether GST is payable or not?
The above situation is addressed by section 173 and 174 of Model GST Law
Return of Exempt Goods Under CGST and SGST
In such a scenario, no tax shall be payable thereon if such goods are returned to the said
place of business within a period of six months from the appointed day and such goods are identifiable to the satisfaction of the proper officer
Return of Duty or Tax Paid Goods Under CGST and SGST
In such a scenario, two things to be kept in mind
Goods Returned by Registered Taxable Person: In such instance, the goods returned will be deemed as supply, therefore input tax credit can be claimed accordingly
Goods Returned by Non-Registered Taxable Person : In such instance, registered dealer can claim refund if such goods were supplied not earlier than six months prior to the GST becoming effective, and goods are returned within six months of GST becoming effective
Practical Implication of the above Provision: Before the migration to GST begins, dealer or a manufacturer should make list of goods sold to registered dealers and non-registered dealers. This will typically impact the manufacturing and trading concerns who sell both to B2B customers as well as B2C customers.