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ACCOUNTING ENTRY UNDER GST SECTION 17(5)(H)

Vikram Musale (25 Points)

30 January 2025

HOW TO PASS ACCOUNTING ENTRY UNDER GST SECTION 17(5)(H). REVERSAL OF IGST CREDIT AGAINST MATERIAL DESTROYED.

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Rama chary Rachakonda (Master in Accounts & high court Advocate) (8545 Points)
Replied 30 January 2025

To pass an accounting entry for reversing IGST credit on materials destroyed under GST Section 17(5)(h), follow these steps:

Accounting Entry Debit: Expense Account (e.g., "Loss on Destruction of Materials")

Credit: Input Tax Credit (ITC) Account (e.g., "IGST ITC")

Example Suppose you have ₹10,000 worth of materials that were destroyed, and the IGST rate is 18%. The IGST credit availed initially would be ₹1,800 (18% of ₹10,000). To reverse the IGST credit: Debit: Loss on Destruction of Materials ₹1,800 Credit: IGST ITC ₹1,800 GST Section 17(5)(h)

This section states that ITC shall not be available for goods lost, stolen, destroyed, written off, or disposed of by way of gift or free samples. Additional Steps 1. *Record the destruction*: Document the destruction of materials, including the date, quantity, and value. 2. *Reverse the ITC*: Pass the accounting entry to reverse the IGST credit. 3. *Update GST returns*: Reflect the reversal of ITC in your GST returns (GSTR-3B and GSTR-1). 4. *Maintain records*: Keep records of the destruction, accounting entry, and GST return updates for audit purposes. Consult a tax expert or accountant to ensure compliance with GST regulations and accurate accounting treatment.

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