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Reversal of ITC u/s. 17(5)(h)

CA Suresh Jain (Proprietor) (8981 Points)

12 March 2023

whether reveral of proportionate ITC is requied under GST Act in case of loss of weight due to evaporation of moisture during the process of production

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CA Suresh Jain (Proprietor) (8981 Points)
Replied 12 March 2023

Under the GST Act, input tax credit (ITC) can be claimed on goods and services used or intended to be used for business purposes. The amount of credit that can be claimed is generally based on the proportion of taxable supplies made by the registered person.

With regard to the loss of weight due to evaporation of moisture during the process of production, it is important to note that the GST law allows for the reversal of ITC in certain cases where the inputs or input services are lost, destroyed, or stolen. However, the law does not specifically mention the evaporation of moisture as a reason for the reversal of ITC.

In order to determine whether the reversal of ITC is required in this case, it would be necessary to consider the specific facts and circumstances of the situation. If the loss of weight due to evaporation of moisture is a normal and unavoidable part of the production process, and if the amount of loss is within reasonable limits, it may be possible to claim the full amount of ITC without any reversal.

On the other hand, if the loss of weight due to evaporation of moisture is excessive or if it is caused by negligence or improper handling of inputs, then it may be necessary to reverse a proportionate amount of ITC. Ultimately, the decision on whether to reverse ITC in this case will depend on a careful analysis of the specific facts and circumstances involved.