GST Input Write Off

[Ethirajan Parthasarathy]

Query

A dealer has some unutilized GST input tax in electronic credit ledger. From a particular date, the goods dealt by him becomes non taxable and hence writes off the balance of input tax in electronic ledger.

Can this write off be disallowed u/s 43B , since relevant input taxes were incurred in earlier years or can be disallowed as “ Prior Period expenses”.

[SANJAY JAIN]

Instead of writing off the input tax amount, you can add the same to cost of inventory and it will not be a prior period item. However you need to do the impairment test i.e. valuation of inventory at cost or Net realisation value whichever is less.

[DR.MARIAPPAN GOVINDARAJAN]

Whether the ineligible input tax credit can be reversed?

[Ganeshan Kalyani]

The input tax credit can be reversed from the GST portal also.

AI Summary

GST input tax treatment: unused credits may be capitalised to inventory or reversed via portal to regularise tax position. When goods become non taxable and GST input credit remains unutilised, avoid a direct write off; instead capitalise the credit to inventory cost and perform an impairment test (cost versus net realisable value), or reverse the input credit through the GST portal to regularise the electronic credit ledger and mitigate risk of tax disallowance.