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

[KASTURI SETHI]

In my view, reversal is not required on the following grounds :-

(i) Not hit by Section 17(5)(h) of CGST Act. The word. 'spoiled' does not find place in this sub-clause.

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

(ii) Sale of scrap i.e. spoiled goods are covered in the phrase, "used in the course or furtherance of his business" as per Section 16 (1) of CGST Act

[Shilpi Jain]

Agree with kasturi sir. Once goods sold with payment of tax, be it whatever value , ITC would be eligible.

[Ganeshan Kalyani]

No need to reverse the input tax credit as clarified by experts.

[RAMASWAMY Advocate]

yes, in my view the expert opinions appear to be correct.

[KASTURI SETHI]

Sh.Ramaswamy Ji,

Thanks for your concurrence with the views. I could not digest the word, 'appears'. In my views, the word, 'appears' contains the element of uncertainty. In other words, the absence of confirmation. Do you agree ? Your views please, sir.

AI Summary

Input tax credit reversal not required when spoiled goods are sold as scrap and tax has been paid.
Reversal of input tax credit is not required when goods that became spoiled are sold as scrap. The statutory exceptions to credit retention do not expressly cover spoilage, and disposal by sale of scrap with tax charged is treated as use in the course or furtherance of business, thereby preserving input tax credit eligibility.