INVENTORY -PROVISION FOR WRITE OFF IN BOOKS OF ACCOUNTS

[Ramaswamy S]

Section 17(5)(h) of the CGST Act, 2017 says that the ITC is not allowed if the stock is written off in the books of accounts.

Rule 3(5B) of Cenvat Credit Rules says that the Credit is to be reversed if the stock is written off fully or partially or provision is made in the books of accounts partially or fully.

Further, the CCR provided the recredit of credit reversed already whereas there is no such provision in the GST.

There is a difference in the two provisions.

Whether this omission is a unintentional or delibrate?

Whether the ITC is to be reversed in case if provision is made to write off in the books of accounts.

If this is an unintentional omission and the law is rectified (if) whether it will be considered as clarificatory and shall have an retrospective effect or prospective effect?

If the issue is raised during audit and is litigated ,what is the chances of success for the assessee ?

The recent judgment of the Supreme Court has held that in case of ambiguity, the case will be tilted towards revenue.

What will be the impact of this Supreme Court decision in this matter?

Regards

S.Ramaswamy

AI Summary

Debate on ITC reversal for inventory write-off under GST: Section 17(5)(h) vs. Rule 3(5B) differences discussed. A discussion on a forum addresses the issue of whether Input Tax Credit (ITC) should be reversed when inventory is written off or a provision for write-off is made in the books of accounts under the Goods and Services Tax (GST) framework. The conversation highlights the differences between Section 17(5)(h) of the CGST Act, 2017, which does not explicitly mention provisions for write-offs, and Rule 3(5B) of the CENVAT Credit Rules, which requires credit reversal for such provisions. Participants debate whether this omission is intentional or accidental and discuss the implications of a recent Supreme Court ruling favoring revenue in ambiguous cases. They consider whether any future legal clarification would have retrospective or prospective effects and advise waiting for an audit or notice before taking legal action.