GST on amount written off

[Kaustubh Karandikar]

XYZ sold material to export customer (non-related party) in 2016 and also the export formalities like filing proof of export has been completed in 2016 only. XYZ not received 15% amount from customers against these materials. The customer is now bankrupt and will not pay this 15% amount. XYZ are in the process of making provisions for bad debts for amount not receivable. After taking approval from bank, they will write off this amount in books of accounts.

1) Whether GST will be applicable on provisions for bad debts for non-related party?

2) Whether GST will be applicable on write off of amounts not receivable from customers.

3) Is proportionate ITC is required to be reversed to the extent of amount not received?

AI Summary

GST Not Applicable to Bad Debt Write-Off; No ITC Reversal Needed, Potential Return of Export Benefits Discussed XYZ sold goods to an export customer in 2016, completing all export formalities. However, 15% of the payment remains unpaid due to the customer's bankruptcy. XYZ plans to write off this amount as a bad debt after bank approval. The discussion addresses whether GST applies to bad debts and the write-off, and if proportionate Input Tax Credit (ITC) needs reversal. Responses indicate GST does not apply to bad debts or write-offs in this case, nor is ITC reversal required. However, export benefits like MEIS and DBK may need to be returned if the amount is unrecoverable.