ITC reversal on goods lost in fire

[Kaustubh Karandikar]

Goods lost in fire also includes ‘Work – In – Process (WIP’) material. How to arrive at the amount of input tax credit to be reversed in case of WIP lost in fire?

[Padmanathan KV]

If ITC is going to be reversed on WIP lost in fire, then it has to be reversed based on inputs consumed in the WIP.

However, there is also a view that no ITC is required to be reversed o WIP/ Finished products.

[Shilpi Jain]

If ITC is to be reversed then consider to take data from the BOQ. Identify the quantum of material that was in the WIP and on a reasonable basis estimate the ITC involved in those inputs and reverse.

[Amit Agrawal]

Goods - on which ITC availed - were not lost by fire, but the 'intermediary goods during manufacturing' / 'finished goods after manufacturing' were lost. So, restriction u/s 17 (5) (h) does not apply. This is more so where there is absence of any machinery provision prescribed to calculate ITC involved in these events.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Ganeshan Kalyani]

'Goods lost' is covered under sec.17(5) but how the goods lost is not mentioned. So, goods may be lost by fire and therefore falls under the said section. ITC reversal is required.

[Ganeshan Kalyani]

In order to arrive at a value of WIP the stock available under WIP may be considered and a GST percentage may be applied to that stock and arrive at GST. The accounting system should be having the WIP quantity which can be referred.

AI Summary

Input tax credit reversal for goods lost in fire: whether WIP requires ITC reversal based on inputs consumed. Dispute centers on whether ITC must be reversed when WIP or finished/intermediary goods are lost by fire. One approach requires reversing ITC attributable to inputs consumed in WIP, estimated via BOQ or WIP accounting and applying a GST percentage to stock. Another view argues no reversal where originally claimed inputs were not destroyed and no statutory method exists for apportioning ITC in such losses.