Goods Returned by a Customer

If you provide a refund or credit on goods returned by a customer, the corresponding GST and QST may be refunded or credited to the customer. In either case, you must prepare a credit note and give it to your customer.

The note must include the following information:

  • a statement to the effect that the document is a credit note;
  • your name or business name and your GST and QST registration numbers;
  • the customer's name or business name;
  • the date on which the credit note is issued;
  • the amount of the adjustment, credit or refund, or a statement to the effect that the total amount includes this amount, and the tax rate and reduction applicable to each item or service.

A debit note prepared by the customer and containing the information specified above is also acceptable.

You may deduct the GST and QST you refunded (or credited) to the customer from the net tax for the reporting period during which the credit or debit note was prepared, provided you have already taken the tax into account in the calculation of net tax for the reporting period concerned or a previous reporting period. The customer, in calculating net tax, is required to add the tax refunded by you. This is particularly important if the customer is a registrant and claimed an ITC and an ITR for the tax initially paid.

If you refund only a percentage of the purchase price (for example, 85%) and keep the balance to cover repackaging or other expenses, you may refund only 85% of the tax initially collected. You must also prepare a credit note (or request a debit note) for that amount.

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