Goods Damage due to flood

Sir,

 

Some goods damage due to flood and heavy rain i have pass the below entry in books

Goods damage. DR. UNDER EXPENSES.

PURCHASE AC CR

its right entry its allowable expenses in point view of income tax ?

Itc need to reverse ?

Any other suggestion please advise

Replies (3)
Quick Summary
This discussion addresses the correct accounting and tax treatment for goods damaged by floods and heavy rain. It clarifies the journal entry required, including the reversal of Input Tax Credit (ITC) under the CGST Act. The advice also covers whether the loss is an allowable expense for income tax purposes and suggests correcting stock journals to reflect the damage.

1) If you paid GST on damaged goods then you have to pass following entry , your above entry is partially correct. 

Damage Goods A/c Dr 

To Purchases    A/c  Cr 

To Input CGST             A/c   Cr 

To  Input SGST            A/c    Cr 

Narration -( Goods damage, ITC reversal) 

 

2) You have to reverse ITC , under section 17(5)(h) of the CGST Act (please refer) , may be along with interest. 

3) It may be allowable expenses under section 37(1) of the Income Tax Act 1961, subject to proper documents and proof of goods damage , please check. 

4) you have to correct Stock Journal , by reducing stock of goods damage, from  Goods Consume, that automatically reduce your closing stock amount in Trading Account in Accounting Software. 

Take more opinion on this. 

Thank you very much Sir,

You are welcome, however take more opinion .

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