ITC Reversal on Partially Damaged Stocks

[Rajendra Prasad]

Dear Sir, My stocks are destroyed in a fire accident. Some stocks are fully damaged and some stocks are partially Damaged. Received Insurance Claim also. Partially damaged Stock is sold at ₹ 10 per KG which is purchased for ₹ 100 per Kg. stocks. 1. Am I required to reverse ITC on partially damaged stocks also. 2. If I am not required to reverse the ITC , ITC per kg is ₹ 18 where as GST on Outward supply is ₹ 1.80 per Kg . Whether the department will accept this ? Please clarify.

AI Summary

Debate on ITC Reversal for Damaged Goods: Sections 16 & 17(5)(h) of CGST Act vs. Business Activity Argument A business owner inquires about the need to reverse Input Tax Credit (ITC) on partially damaged stocks sold at a reduced price after a fire accident. The first response indicates that ITC must be reversed for destroyed goods as per Section 16 and Section 17(5)(h) of the CGST Act, which excludes goods that are lost or destroyed. Another reply concurs, stating that credit must be reversed. However, a third response suggests that partially damaged goods sold at a lower price still qualify as business activity, and thus, ITC reversal may not be necessary since GST is paid on the outward supply.