GST -loss in transit

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This query is : Resolved

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When goods are lost in transit after GST has been paid, the client faces a dilemma regarding the GST liability and input tax credit (ITC) reversal. While the insurance company is expected to pay the claim including GST, the client needs to understand how to account for this in their books. The consensus suggests that since the sale wasn't completed, a financial credit note can be issued, but this doesn't need to be reflected in GST returns. The GST paid on the original sale is treated as a transit loss, and input tax credits on related inputs may also need reversal if the insurance payout is without GST.

Sonnal Khandaray

Sonnal Khandaray (Querist)

30 September 2021 Hi All
One of my client has sold the goods and goods got lost in transit in the month of dec -2020. Goods did not reach to the customer.Client has paid GST liability as well.

Now he has filed a claim with insurance company for the loss. What treatment needs to be given in the books for the goods for GST as customer of the client wants reversal of credit which is seen in GSTR-2B?

Whether insurance company will pay the claim with GST or without GST?

Thanks in advance.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

30 September 2021 Insurance company will pay the claim with GST.
GST paid on sales, claim made with insurance including GST, hence no need for reversal of ITC.
Keep sale value under current assets and adjust it against insurance settlement.

Sonnal Khandaray

Sonnal Khandaray (Querist)

04 October 2021 Thanks Sir.
Insurance company is not going to pay with GST. Then what is to be done with GST paid ?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

04 October 2021 Charge it as transit loss.

Sonnal Khandaray

Sonnal Khandaray (Querist)

05 October 2021 Can I issue credit note for the sale booked for above transaction?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

05 October 2021 Issue financial credit note.

Message likes : 1 times

Sonnal Khandaray

Sonnal Khandaray (Querist)

05 October 2021 Can I show the same in GST return?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

05 October 2021 No, it's financial credit note need not be shown in GST return.

Sonnal Khandaray

Sonnal Khandaray (Querist)

05 October 2021 If sale did not complete as good didnt reach the destination, then Sir, why can't we show in GST returns?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

05 October 2021 Since insurance claim lodged no need to show in GST return.

Sonnal Khandaray

Sonnal Khandaray (Querist)

05 October 2021 ok. But insurance company is going to pay without GST. So GST paid previously on sale is loss to my company. again I need to reverse the credit paid on inputs as well.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

05 October 2021 Insurance company will pay including GST.

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