CENVAT TAKEN TO BE REVERSED ON INSURANCE CLAIM

[SAFETAB LIFESCIENCE]

Dear Experts,

A company's Raw Materials got damaged/lost due to fire accident in August, during GST regime. The materials purchased prior to July and Cenvat availed got fired and totally lost.

Now, they are about to get insurance claim and insurance company insisting to reverse the input duty (Cenvat) availed for the materials which got fired and lost totally.

What amount they have to reverse ? Availed 12 % Excise Duty amount (or) 18% GST amount which being the present Tax structure for the said commodity lost. How, the duty can be reversed in GST. The only one way to reverse ITC if required balance is there in Electronic Credit Ledger (or) pay cash vide challan and put one entry in GSTR-3B. I think there is no clear explanation for such of this issues.

Insurance company will give the exact amount of Tax 12 % or 18% the amount debited and proof given. But, the affected company has to buy Raw Materials only at 18% GST.

Please guide......

[Rajagopalan Ranganathan]

Sir,

If the raw materials are destroyed by fire before using them in the manufacture of dutiable final products you have to reverse the credit taken. the amount to be reversed is the credit availed at the time of receipt of the raw material. Date of reversal of the credit do not have any effect on the amount to be reversed.

AI Summary

Reversal of input tax credit required where inputs are destroyed; amount equals credit originally availed, irrespective of reversal date. Where raw materials on which input tax credit was availed are destroyed before use, the taxpayer must reverse the credit equal to the credit availed at the time of receipt; the date of reversal does not affect the amount. Reversal may be made by debiting the Electronic Credit Ledger if available or by paying cash and recording the entry in GSTR-3B; insurer reimbursement does not alter the obligation.