GST on damaged goods destroyed

[Kaustubh Karandikar]

XYZ supplied food products to Distributors which was returned back to XYZ due to expiry date over and damaged goods. On receipt of these goods, XYZ issued credit note to the distributors but had not adjusted the GST originally paid against the supply. The returned goods were destroyed by XYZ being unusable. Is XYZ required to pay GST / reverse ITC on such destroyed goods? In my view, provisions of Section 17(5)(h) will not get attracted here since GST is already paid once and the same is not adjusted also against credit note issued to the customer. Secondly, the goods destroyed is not fetching any value to XYZ. Section 17(5)(h) speaks about non – eligibility of credit on goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples. Views of the experts please.

AI Summary

Does XYZ Need to Reverse Input Tax Credit on Destroyed Goods Under Section 17(5)(h) of GST Act? A discussion on a forum addresses whether a company, XYZ, needs to reverse Input Tax Credit (ITC) or pay GST on expired and damaged goods that were returned and subsequently destroyed. The initial query suggests that Section 17(5)(h) of the GST Act, which disallows credit on destroyed goods, may not apply since GST was already paid. However, experts argue that XYZ must reverse ITC on inputs used in the destroyed goods as they were not used for business purposes. A detailed debate ensues, highlighting the importance of following proper procedures, including issuing credit notes and considering relevant circulars, to minimize litigation.