QUESTION

ABC remove material like (1) raw material or other equipment - for analysis/test, (2) EPT sludge, (3) finished goods sample as marketing sample, (4) vendor material return to vendor under challan as per rule 55 as these are non-sales FOC transactions. Will there be any GST applicability? And procedure to be adopted for such transactions?

ANSWER

Facts of the Case: Procedure to be adopted in GST for removal of material on non-sales FOC transactions basis like (1) raw material or other equipment - for anaysis/test, (2) EPT sludge, (3) finished goods sample as marketing sample, (4) vendor material return to vendor.

Law Applicable: SECTION 31 OF CGST ACT
(1) A registered person supplying taxable goods shall, before or at the time of,'
a) removal of goods for supply to the recipient, where the supply involves movement of goods; or
b) delivery of goods or making available thereof to the recipient, in any other case,
issue a tax invoice showing the description, quantity and value of goods, the tax charged thereon and such other particulars as may be prescribed----------------

CGST RULE 55

(1) For the purposes of-
(a) supply of liquid gas where the quantity at the time of removal from the place of business of the supplier is not known,
(b) transportation of goods for job work,
(c) transportation of goods for reasons other than by way of supply, or
(d) such other supplies as may be notified by the Board, the consigner may issue a delivery challan, serially numbered not exceeding sixteen characters, in one or multiple series, in lieu of invoice at the time of removal of goods for transportation, containing the following details,-------------

Reply: To control the movements of goods (apart from E Way Bill) two types of documents are used in GST these are invoice and challan.
The invoice is to be issued as per section 31 of CGST Act read with rule 54 of CGST rules but in case where the invoice is not to be issued then challan should be issued under rule 55.

Please check whether you are reversing ITC against clearance of free sample, however if the credit amount is enough then you may calculate the possibility to clear free samples at some nominal value or free with some other supply so that reversal of ITC may be avoided.

Sometimes the reversal of ITC remains low but it requires much calculation if there are a lot of inputs or services used for making a product . (Reply dt. 01/06/2021)