17 (5) GOODS DAMAGE & SCRAP SALE

[santosh yadav]

Dear Professional,

We had bought the goods 2 years back due to non-sales on time got spoiled which we sold in scrap should we refund the input tax of the value which is difference of scrap sale and purchase price

AI Summary

No ITC Reversal Needed for Spoiled Goods Sold as Scrap; Supported by Sections 17(5)(h) and 16(1) of CGST Act. A discussion on a forum addressed whether input tax credit (ITC) must be refunded when goods purchased two years ago became spoiled and were sold as scrap. The consensus among participants, including several professionals, was that there is no need to reverse the ITC. The reasoning is that the situation is not covered under Section 17(5)(h) of the CGST Act, which pertains to goods lost, stolen, or disposed of as gifts. Additionally, selling spoiled goods as scrap is considered a business activity under Section 16(1) of the CGST Act, allowing for ITC eligibility.