TaxTMI 
TaxTMI 
The recipient has debited the supplier by Rs. 30000/- due to damaged goods received.
The recipient has neither reversed the ITC nor the supplier has reduced his liability.
Can department still insist for reversal of ITC?
ITC reversal
28 Jun 2022 
5 Replies 
3391 Views Asked by
Input tax credit reversal: damaged but repairable goods may not require ITC reversal absent a statutory credit note or insurance claim.
Input Tax Credit reversal is disputed where damaged goods led to a commercial debit/credit adjustment without a statutory credit note and without supplier tax reduction. If goods are destroyed, blocking of ITC may apply; if salvageable or repairable, blocking may not apply. Issuance of a formal credit note under the statutory provision is not always mandatory and commercial adjustments differ from the statutory credit note. If the supplier claims insurance and the recipient pays nothing, ITC reversal may be required; where goods are salvageable and commercial settlements occurred, many practitioners view reversal as unnecessary though subject to dispute. (AI Summary)
Input Tax Credit reversal is disputed where damaged goods led to a commercial debit/credit adjustment without a statutory credit note and without supplier tax reduction. If goods are destroyed, blocking of ITC may apply; if salvageable or repairable, blocking may not apply. Issuance of a formal credit note under the statutory provision is not always mandatory and commercial adjustments differ from the statutory credit note. If the supplier claims insurance and the recipient pays nothing, ITC reversal may be required; where goods are salvageable and commercial settlements occurred, many practitioners view reversal as unnecessary though subject to dispute. (AI Summary)