Section 142 of CGST explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 142 of the CGST Act, 2017 is the omnibus transitional clause in Chapter XX that resolves a range of situations straddling the old and new tax regimes. It deals with goods returned after the appointed day, upward and downward price revisions through supplementary invoices or credit notes, pending refund claims of earlier duties and taxes, disposal of pending assessment or appeal proceedings, and goods sent on approval or on sale-or-return before 1 July 2017. Broadly, refunds and recoveries of the earlier taxes are dealt with under the earlier law and settled in cash, while ongoing contractual adjustments after the appointed day are given effect through GST documents.
What Section 142 Says — In Plain English
Not every transaction fits neatly on one side of 1 July 2017. Goods sold under VAT come back as returns under GST; contracts signed under the old law get their prices revised under the new one; refund claims and appeals filed under excise or service tax are still pending. Section 142 is the catch-all that tells you which law applies to each of these loose ends. In plain terms, it splits the world in two: anything that is really about the old taxes (refunds, recoveries, appeals) is finished off under the old law and paid or recovered in cash, while anything that continues as a live commercial transaction after the appointed day is documented and taxed under GST.
This split is the key to reading the whole section. Wherever the substance of a claim relates to a period, a duty or a proceeding under central excise, service tax or VAT, Section 142 preserves the earlier law for that limited purpose and directs that money changes hands in cash rather than as GST credit — this prevents old liabilities and refunds from silently leaking into the GST credit chain. Conversely, wherever a transaction genuinely continues into the GST era — a price that is revised, goods that are returned by a GST-registered buyer, or approval goods that come back — the transaction is brought squarely under GST and evidenced with GST documents. Keeping this old-law-versus-new-law dividing line in mind makes each of the many sub-clauses far easier to apply correctly.
Clause / Sub-section Breakdown
| Sub-clause | Situation and treatment |
|---|---|
| 142(1) — Returned goods | Duty-paid goods sold up to six months before the appointed day and returned within six months after it: seller gets an old-law duty refund if returned by an unregistered person; a return by a registered person is treated as a fresh GST supply. |
| 142(2) — Price revision | Upward revision on a pre-GST contract is given effect by a supplementary invoice/debit note deemed issued under GST; downward revision by a credit note, allowed only if the recipient correspondingly reduces input tax credit. |
| 142(3)–(5) — Refund claims | Claims for refund of CENVAT credit, duty, tax or interest for the earlier period are disposed of under the existing law and any amount due is paid in cash; rejected credit lapses. |
| 142(6)–(8) — Pending proceedings | Outcomes of appeals, reviews, assessments and adjudications on earlier credit or output tax are recovered as arrears of tax under GST, or refunded in cash under the earlier law. |
| 142(11)–(12) — Overlap & approval goods | Tax already leviable under VAT/service tax is not charged again under GST; goods sent on approval up to six months before the appointed day and returned within six months after it attract no tax, else tax is payable. |
Applicability & Scope
Section 142 applies to transactions that began under central excise, service tax or VAT but concluded, were adjusted, or were disputed after the appointed day. It is triggered when a transaction crosses the 1 July 2017 boundary — sold before and returned after, priced before and revised after, taxed partly before and partly after, or where a claim or proceeding under the old law is still alive. It applies both to registered persons continuing under GST and, for refund purposes, to persons dealing with unregistered buyers.
Worked Examples
Example 1 — returned goods and price revision. A manufacturer sold excise-paid goods worth ₹2,00,000 (excise ₹24,000) to an unregistered customer on 1 May 2017. The customer returns the goods on 15 August 2017 — within six months of the appointed day and within six months of the sale. Under Section 142(1) the manufacturer claims a refund of the ₹24,000 excise duty under the earlier Central Excise law. Separately, on a long-term supply contract signed before GST, the price is revised upward by ₹50,000 on 30 September 2017; the supplier issues a supplementary invoice deemed issued under the CGST Act and pays GST at 18%, i.e. ₹9,000, on the incremental amount.
Example 2 — pending refund and proceeding. The same taxpayer has a service-tax refund claim of ₹75,000 pending on 1 July 2017. It is decided in October 2017 and, being admissible, is paid to him in cash under the Finance Act, 1994 rather than as GST credit. In a separate appeal, ₹40,000 of CENVAT credit is finally held inadmissible; under Section 142(6) this amount is recovered as arrears of tax under GST and the rejected credit lapses.
Step-by-Step in Practice
- Classify each straddling transaction: return, price revision, refund claim, pending proceeding, or approval goods.
- For returns, check whether the buyer is registered (fresh GST supply) or unregistered (old-law duty refund) and the twin six-month tests.
- For price revisions, issue a supplementary invoice/debit note (upward) or credit note (downward) treated as a GST document within the prescribed time.
- For refund claims and appeals, pursue them under the earlier law; expect any admissible amount in cash, not as credit.
- For goods on approval, track the six-month return window and pay tax if not returned in time.
Common Mistakes & Practical Notes
- Treating a return by a registered buyer as an old-law refund — it is actually a fresh GST supply.
- Allowing a downward price-revision credit note without confirming the recipient has reversed the corresponding input tax credit.
- Expecting a pending CENVAT/service-tax refund to come as GST credit — it is paid in cash under the earlier law, and rejected credit lapses.
- Missing the six-month window for goods sent on approval, which then become taxable.
- Assuming GST applies to the portion of a supply already taxed under VAT or service tax — Section 142(11) prevents double taxation.
Timelines, Forms & Related Sections
The recurring timeline across Section 142 is the six-month window (both before and after the appointed day) for returned goods and approval goods, and the prescribed period for issuing supplementary invoices and credit notes. Section 142 is read with Section 140 (transitional credit), Section 141 (job-work goods), Section 34 (credit and debit notes), Section 54 (refunds under GST) and Section 174 (repeal and saving of earlier laws). Together they close out the transition from the pre-GST regime.
Litigation & Current Relevance
Section 142 remains actively litigated because many old-law refund claims and adjudication/appeal proceedings continued winding down for years after 2017, and the section decides whether the money moves in cash under the old law or as arrears/credit under GST. Common disputes concern whether a rejected CENVAT amount can nonetheless be salvaged as transitional credit (linking back to the Section 140 controversies and the Filco Trade re-opening of TRAN-1), the correct treatment of price-revision credit notes where the recipient has not reversed credit, and refunds of duty on goods returned by unregistered buyers. Because these tails are long, Section 142 continues to be cited in current refund and recovery matters even though the substantive transition is over.