GST implications on goods damaged in fire

[Kaustubh Karandikar]

XYZ is a manufacturer and is registered with GST. Fire broke out ay his manufacturing unit and the

1) Raw Material,

2) Semi – finished Goods and

3) Finished goods got damaged in the fire. These goods now they want to destroy being unusable. What is the action to be taken against each item as per GST provisions?

[SHARAD ANADA]

Section 17(5) Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (1) of section 18, input tax credit shall not be available in respect of the following namely:-

(a)....

to (g)...

(h) goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples;

so you have to reverse credit availed on such goods.

However claim received from insurance company is actionable claim and actionable claim is neither supply of goods nor supply of service as per Sch III of CGST Act 2017

[KASTURI SETHI]

Intimation should be given to the department and permission to destroy unusable material/goods should be got from the jurisdictional Deputy Commissioner (in-charge GST Division).

[sarojni singh]

GST UPDATE ON REVERSAL OF ITC IN CASE OF GOODS LOST BY FIRE. The bare analysis of above section makes it clear that this section has overriding effect and it states that the ITC shall not be available in respect of goods lost, stolen, destroyed or written off.

AI Summary

Reversal of Input Tax Credit required where goods are destroyed by fire, with insurance treated as non-supply. Reversal of input tax credit is required where inputs, semi-finished goods or finished goods are lost, stolen, destroyed or written off under Section 17(5)(h); insurance proceeds are actionable claims and not treated as supply under Schedule III; taxpayers should notify the tax department and obtain permission from the jurisdictional Deputy Commissioner before destroying unusable goods.