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ITC on sales return.

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SHAHHUL IQBAL

article assisstant

49 Points Posted on 16 February 2021

Dear all,

Sales returned item and to be disposed off.

what about the ITC claimed on raw material of which used to manufacturing this FG.

Replies (3)

Quick Summary

This discussion clarifies the treatment of Input Tax Credit (ITC) when goods are returned and subsequently disposed of. Generally, ITC cannot be claimed on goods meant for disposal, and any ITC claimed on the raw materials used to manufacture these goods must be reversed. However, if a fresh invoice is issued by the buyer, it's considered a supply, meaning you only reverse the tax paid on the sale itself, not necessarily the ITC on raw materials.

Dasharath Rao

Student

25 Points Posted on 16 February 2021

Hi,

You cannot claim ITC on goods that are to be disposed off as per "Section 17(5)(h) of CGST Act". ITC claimed on raw materials used to produce those goods need to be reversed.

SHAHHUL IQBAL

article assisstant

49 Points Posted on 16 February 2021

But some observation are found that in the case of fresh invoice issue by buyer, which considered as a supply so we have to reverse the tax paid against the sale only. no need to reverse the ITC of raw materials.

Bhavika Kothari

1012 Points Posted on 27 February 2021

You can reverse only the amount equivalent to the one which you have paid while selling the scrap or the amount of GST which you have paid to your vendor whichever is less