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Whether ITC to be reversed or not of the Goods destroyed due to lockdown ?

CA Rahul Mittal 
on 15 June 2020

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Goods of many taxpayers have destroyed or expired due to lockdown. They had paid Goods and Services Tax (GST) on it and taken the input tax credit. Many manufactures had given GST on the raw materials which are used to make the finished goods. Now the raw material has expired or gone bad.

Those goods will not come under sale due to destroyed.

The problem is now whether taxpayers will have to reverse the input of GST or not on the destroyed or expired goods?

Section 17 of CGST Act, 2017 deals with the circumstances where input tax credit not available to taxpayers.

Whether ITC to be reversed or not on the Goods destroyed due to lockdown

Section 17(5)(h) of CGST Act, 2017

Tax credit shall not be available to a registered person on goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples.

 

They now must reverse the input tax credit under the current law.

Businesses are already in financial straits. After that, the GST cost on these expired or destroyed goods can put the business more financially strapped.

Now taxpayers are looking at the government to seek a tweaking in the GST law temporarily due to the Covid-19 pandemic.

 

Disclaimer: This is meant purely for general educational purpose. While the information is believed to be accurate to the best of my knowledge, I do not make any representations or warranties, express or implied, as to the accuracy or completeness of this information. Reader should conduct and rely upon their own examination and analysis and are advised to seek their own professional advice. This note is not an offer, invitation, advice or solicitation of any kind. I accept no responsibility for any errors it may contain, whether caused by negligence or otherwise or for any loss, howsoever caused or sustained, by the person who relies upon it.


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