We had sold our finished goods @ 18% to customer. In transit, the goods was damaged and return to plant and we issue credit note and reverse our Output Tax Liability. After survey by insurance company it was decided to sale these goods as it is on scrap @ 5%. Now we pay GST @ 5% on scrap value. and the Rest amount received us without GST from insurance company after deduction as per insurance policy.
Now, My Question is: -
Whether we have reverse credit taken on Raw Material ? If yes How much i.e. on Scrap Qty. or balance Qty. or proportionate Amount received from Insurance Co. ?
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Query on ITC Reversal
Replies (1)
Dear
As per Section 17 (5) (h) of the CGST Act, provides that ITC shall not be available in respect of goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples.
Since the goods was damaged and Return and you have issue credit note and reverse Tax liability.
Now you need to pay GST on Scrap Value based on the Fair Market value. No further reverse credit taken on Raw Material or any amount received from Insurance Company.
This is my opinion based on the facts
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