Allowability of write off of accumulated gst credit

[manish rupani]

I would like to know whether accumulated GST credit due to inverted duty structure, of earlier years and also not able to get refund from GST authorities can be claimed as an expense / writing off under section 37(1) of the Income Tax? If yes, please provide me any supporting documents or case laws. Thank you in advance.

[Padmanathan KV]

In my personal opinion, it is allowable expenditure and not a prior period expenditure. This is because it becomes expenditure only when it decided to be written off based on the position in GST law.

[manish rupani]

Thanks a lot Shri Padmanathan Kollengode

[Charu Tyagi]

As per Section 37, Any Indirect taxes or any interest thereon shall be allowed as expense subject to section 43 i.e. Payment actually made. So, therefore writing off accumulated balance of GST is allowable deduction.

AI Summary

Allowability of GST credit write-off: unrecoverable input tax can be treated as a deductible business expense. Accumulated GST input credit unrecoverable due to inverted duty structure and failed refunds can be written off and treated as an allowable business expenditure under the income tax general expense provision; one view treats the write off as an expense when the taxpayer elects to abandon the credit rather than a prior period adjustment, and another relies on the rule that indirect taxes and related interest are deductible subject to actual payment.