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

Reversal of input tax credit required when returned goods are destroyed, with credit notes and procedural compliance to follow.
If a supplier availed input tax credit on inputs contained in finished goods that are returned and destroyed, those credits must be reversed because the destroyed goods were not used in the course or furtherance of business. Recipients who claimed ITC on the original supply must reverse their credits on return, and suppliers should issue credit notes to neutralise earlier tax liabilities. Suppliers who paid tax but did not adjust by credit note may seek refund subject to conditions; procedural compliance and recordkeeping are necessary to avoid mismatches and disputes.