Treatment of time expired drugs or medicines under GST


Circular No. 72/2018 issued on 26.10.2018 discusses the issues faced by the pharmaceutical industry in respect of the drugs or medicines that are returned after their date of expiry by the retailers or wholesalers to the manufacturers.

The circular has prescribed 2 ways to deal with such business transaction –

  1. To treat return of time expired goods as fresh supply
  • Return by Registered Person It will be treated as a fresh supply and invoice will be issued for value as shown in the invoice on the basis of which the goods were supplied earlier. Recipient of such supply will be eligible to claim ITC subject to conditions of section 16;
  • Return by Composition Taxpayer – A bill of supply will be issued and tax to be paid at applicable rate, however, it’s ITC will not be available to the recipient;
  • Return by unregistered person – Goods to be returned without charging any tax;
  • In all cases, where the goods have been destroyed by the recipient wholesaler or manufacturer, ITC availed on return supply will be reversed;

 2. Return of time expired goods by issuing credit note

The supplier manufacturer or wholesaler can also issue credit note for the time expired goods and such goods may be returned by the retailer by issuing a delivery challan. For this, it is to be noted that goods are returned within the time limit specified in section 34(2) and the person returning goods has either not availed ITC or if availed, ITC has been reversed. In case goods are returned within the time limit, tax liability can be adjusted by the supplier.


  1. We have pharmaceutical business of Bulk drug (API) products. These Finished goods products are not sales due to not order and now same is expired in stock and we need to be destroyed at factory premises. All input goods procure (100% EOU scheme duty free import/Indigenous) exempted and same is used in Finished goods manufactured.
    Pl. clarify ITC to be reversed (exempted goods) or not ?

  2. Dear Dinesh Chaudhari Ji,
    Thanks for your response.
    We would like to share that the Circular No. 72/46/2018 issued on 26.10.2018 has clarified that where the manufactured/finished goods have been destroyed by the supplier or manufacturer, the input tax credit taken under GST has to be reversed as per section 17(5)(h) of the CGST Act 2017.

    In your case, if the inputs have been procured under EOU scheme, no custom duty shall be payable if such goods have been destroyed within EOU after intimation to Custom Authorities (Development Commissioner) or destroyed outside EOU with permission of Custom Authorities. Thus, no ITC to be reversed as not there in this case and nothing to be paid as well, subject to the condition that goods have been destroyed under the supervision of Development Commissioner.

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