ITC availment

[Manoj Pradhan]

Sir , if a manufacturer purchases raw material i.e. scrap for manufacture of finished goods namely MS rod clear scrap as such due to its damage or any other reason below the purchase price . Here , the manufacturer takes ITC on the higher price and sells it lower than purchase price . Please clarify whether the above manufacturer are liable to reverse ITC which could not be used in manufacturing and cleared as such . Thanks

AI Summary

No ITC reversal needed when selling damaged goods below purchase price if used in business; beware of frequent sales. A manufacturer inquired about the need to reverse Input Tax Credit (ITC) when selling goods below purchase price due to damage. Respondents clarified that under GST, tax is based on transaction value, not profit or loss, and no ITC reversal is required if goods are used in business activities. However, repeated transactions of this nature might trigger investigations. It was emphasized that transactions should be genuine and not between related parties to avoid disputes. The consensus was that ITC could be claimed unless the transactions appear ingenuine or are frequent.