Input tax credit

Reverse input tax credit

1. No input tax credit shall be allowed in respect of purchase of goods-
   • which are held in -
     1. closing stock at the time of discontinuance of business; or
     2. opening stock on the first day of period of composition scheme of payment of lump sum under section 27; or
     3. opening stock on the date on which dealers' liability for payment of tax by virtue of proviso to sub-section (6) of section 3 has ceased; or
   • which are stolen, lost, destroyed, gifted, distributed as free samples or disposed of in any other manner otherwise than in the ordinary course of business; or
   • which are returned to the selling dealer within six months of the date of purchase of such goods.
2. Where a dealer has already claimed input tax credit in respect of any goods referred to in sub-section (1) or has wrongly claimed input tax credit in respect of any goods, benefit of input tax credit to the extent it is not admissible, shall stand reversed and the dealer shall be liable to pay such amount of reverse input tax credit within thirty days after the event comes to the notice of the dealer, along with simple interest at a rate of one and half percent per mensum for the period -
   • except cases of free distribution of goods as samples or disposal of goods otherwise than in the ordinary course of business, in all other cases mentioned in sub-section (1), from the date of occurrence of event and till the date of payment of such amount; and
   • where input tax has wrongly been claimed or goods have been distributed as free samples or disposed of otherwise than in the ordinary course of business, from the date following the last date prescribed for submitting return of the tax period in which goods, in respect of which input tax credit was claimed, were purchased and till the date of payment of such amount.

   Explanation: For the purpose of this section, input tax credit in respect of purchase of goods held in stock, stolen, lost, destroyed, gifted, distributed as free samples or disposed of otherwise than in the ordinary course of business includes input tax credit in respect of purchase of goods used, consumed or utilised in manufacture, processing or packing of any goods held in stock, stolen, lost, destroyed, gifted, distributed as free samples or disposed of otherwise than in the ordinary course of business, as the case may be.