When sale price of a product is less than purchase price, is ITC to be reversed ?
Under which section / rule ?
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Reversal of ITC when goods sold at a price less than its purchase price
Replies (5)
Quick Summary
No, in my view
Yes, when the sale price of a product is less than the purchase price, Input Tax Credit (ITC) is required to be reversed. This is governed by Section 17(2) of the Central Goods and Services Tax (CGST) Act, 2017. It specifies the conditions under which ITC needs to be reversed, and one of those conditions is a reduction in the value of supply
@ AR Rahman sir , everybody telling reversal reversal actually it mean here what action
Pls once Refer sec 17(5) of CGST Act 2017
No reversal for selling below cost:
• GST has no provision requiring ITC reversal merely because goods are sold below purchase price. ITC is allowed if inputs are used for taxable supplies (Sec 16). Price doesn't matter.
• Reversal applies only where goods are lost, destroyed, written off, given as free samples or gifts (Sec 17(5)(h)), or used for exempt or non-business supplies.
• Discounts from suppliers: if they're post-supply discounts by financial credit note (no GST), your ITC isn't reversed (Circular 92/11/2019). If by GST credit note, reverse ITC to that extent.
• Related-party or below-market sales may face valuation under Rule 28, but there's no ITC reversal.
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