Treatment of Input Credit on damaged / stolen goods

[gurmukh kotwani]

1. Dealer Claims input credit for goods purchased locally in Delhi. There are certain damages and pilferage, within reasonable limits, as peculiar to the nature of business.

Whether dealer is required to reverse input credit in respect of normal damages pilferage ?

2.Goods are transferred to Delhi branch from Mumbai head office against 'F' forms. There are certain damages and pilferage, within reasonable limits, as peculiar to the nature of business.

What should be treatments for damages pilferage especially keeping in view that goods were transfer to Delhi against 'F' form and no input credit was claimed ?

[YAGAY andSUN]

Dear Gurmukh,

If the pilferage and damages are within the Industry Norms and are normal, then, such incidence can be ignored but if there are abnormalities then you would have to reverse the Input Tax Credit and amount of the Form F would be shrunk to that extent.

Regards,

Team YAGAY & SUN

(Indirect Tax Consultants)

AI Summary

Input tax credit treatment: normal pilferage may be ignored, abnormal loss requires reversal and Form F adjustment. Normal industry-level damage or pilferage may be ignored for input tax credit; abnormal losses require reversal of input tax credit. For interbranch transfers under Form F, abnormal losses must be reflected by shrinking the Form F declared value, and if input credit was claimed, it must be reversed to the extent of the loss.