Goods lost in transit

[Kaustubh Karandikar]

Goods lost in transit as informed by the Courier service who had collected the goods therefore GST not paid on it. Whether it is correct? If not, what was the correct action to be taken? Any GST liability to the supplier?

[Amit Agrawal]

I have not understood factual position (including reason behind movement of goods through courier, before same got lost) as well as point / context of dispute. Request you to elaborate.

[Kaustubh Karandikar]

Shri Amit ji, Goods are handed over to the courier agency for delivery to the customer along with Tax Invoice. These goods lost in transit as informed by the customer. Since goods got lost, though tax invoice was prepared, it was neither shown in GSTR - 1 no in GSTR - 3B and therefore no GST payment made. Will there be any GST liability in this situation? In my view, proportionate ITC needs to be reversed under Section 17(5)(h). However, GST authorities might demand payment of GST with interest since invoice was issued. You expert views please.

[KASTURI SETHI]

Dear Sir,

What are the terms & conditions of the courier company in this context ? There must be some policy of the company.

Whether the goods were lost due to natural causes (floods, rains etc.) or theft ?

Whether the courier company lodged FIR with the jurisdictional Police Station ?

[GUNASEKARAN K]

Yes, you have to pay the liability for such transaction.

Goods sent along with Tax Invoice and its also recorded in GSTR-1 hence it is also need to report in GSTR-3B and payment of Tax must to be made. In your case, Goods lost during the transit hence your customer not received any goods so he cannot avail ITC and he will not make payment for the transaction.

So, you must issue a credit note for non-supply of goods to reduce your output liability and reverse the Input Tax Credit taken on inputs used to supply of lost goods.

Please refer Clause (h) of Section 17(5) is reproduced below-

ITC is not available if the purchased goods are lost or stolen or damaged or written off or given away as free samples or gifts. Sometimes, ITC would already be claimed upon purchase but might later have to be reversed in GSTR-3B when any of the above scenarios happen.

[Shilpi Jain]

Finished goods lost in transit - reversal of credit may be done. Though a view can also be taken that ITC has been taken only on inputs and input services gone into the FG and not on the FG itself. Though a disputed view.

If its a traded commodity - reverse credit considering goods lost.

[Padmanathan KV]

I agree with views of Sri Gunasekaran Sir and Shilpi Ma'am.

AI Summary

Reversal of Input Tax Credit required where goods lost in transit, with output tax reporting and credit note issuance. Where a tax invoice was issued but goods were lost in transit, the supplier should have reported the supply and discharged output tax; authorities may nonetheless seek tax with interest. The supplier should issue a credit note for non supply to reduce output liability and reverse input tax credit attributable to the lost goods because ITC is blocked when goods are lost, stolen, damaged, or written off. The buyer cannot claim ITC for goods not received.