GST on goods disposed off

[Ethirajan Parthasarathy]

In a manufacturing process, a company uses large quantity of brown paper to prevent chemicals spilling over. The company avails ITC on purchase of brown paper. After completion of manufacturing process, the brown paper becomes hazardous due to contact with chemicals. According pollution control rules, the company has to dispose of waste brown paper in a particular manner. The waste paper is collected by one agency for disposing off of the same. The said agency actually charges certain sum based on the quantity handled which includes transportation also.

As per entry 1 of Schedule 1, disposal of any business asset without consideration also to be treated as supply because ITC on such goods is already availed. My question is how to determine the value for purpose of levy of tax.

[Ganeshan Kalyani]

In my view, reversal of input tax credit on the disposal of waste brown paper is not required.

[Mahadev R]

Please examine if this paper continue to be business asset after it is used and becomes hazardous. If it does not continue to be asset, schedule 1 would not be applicable.

[Alkesh Jani]

Sir,

In this regards, I am of the view that the brown paper, was an input used for production of goods, and ITC may be availed. In the instant case, waste is generated and the said waste cannot be sold in the open market and is required to be dispose as per the law. Here it is not disposal but supply of waste please refer Section 7 (1) of CGST Act. Moreover, Schedule-1 (assets includes Inputs) the Cambridge English dictionary "asset" means something having value, such as a possession or property, that is owned by a person, business, or organization"

For valuation purpose, the charges raised by the agency as per Rule 31.

Thanks

AI Summary

Is Disposal of Hazardous Waste a Supply Under GST? Section 7(1) of CGST Act and Rule 31 Explained. A company uses brown paper in its manufacturing process, availing input tax credit (ITC) on the purchase. After use, the paper becomes hazardous and must be disposed of according to pollution control rules. The disposal is handled by an agency that charges based on quantity. The query concerns whether the disposal is considered a supply under GST, requiring tax levy. One response suggests ITC reversal is unnecessary, another questions if the paper remains a business asset, and a third clarifies that disposal is a supply, referencing Section 7(1) of the CGST Act and suggesting valuation based on agency charges per Rule 31.