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 on bad debts: exported goods treated as exports; GST not payable and ITC need not be reversed.
The documented export is treated as an export for GST purposes; consequently GST does not apply to the bad-debt provision or the write-off of the unpaid amount, and proportionate reversal of input tax credit is not required because the write-off is not treated as a taxable supply or an inventory write-down attracting ITC reversal. Export benefits other than rebate/refund remain available, although some export incentives may be recoverable.