TaxTMI 
TaxTMI 
XYZ is in the manufacture of Sweets and Namkeen. The waste generated while manufacturing these products are non – marketable and therefore is disposed of by dumping and destroying outside the factory without payment of GST. Are they required to proportionately reverse the ITC on common goods and services since no GST is paid on such waste?
Waste and Scrap
02 Jun 2019 
6 Replies 
15517 Views Asked by
Input tax credit reversal debate: disposal of manufacturing waste may trigger proportionate ITC reversal under GST provisions.
Whether waste generated during manufacturing and disposed without payment of tax requires proportionate reversal of Input Tax Credit: one position treats disposal as an outward supply under Sections 2(83), 7(1) and within Section 17(5)(h), requiring ITC reversal; an alternative position regards manufacturing waste as process loss not amounting to outward supply and therefore not attracting reversal. Procedural suggestions include issuing a bill of supply and preserving manufacturing records; an auxiliary income tax TCS point was also raised for scrap transactions. (AI Summary)
Whether waste generated during manufacturing and disposed without payment of tax requires proportionate reversal of Input Tax Credit: one position treats disposal as an outward supply under Sections 2(83), 7(1) and within Section 17(5)(h), requiring ITC reversal; an alternative position regards manufacturing waste as process loss not amounting to outward supply and therefore not attracting reversal. Procedural suggestions include issuing a bill of supply and preserving manufacturing records; an auxiliary income tax TCS point was also raised for scrap transactions. (AI Summary)